On Friday, Special Master for TARP Executive Compensation, Kenneth R. Feinberg, submitted a final report detailing the work of the Office of the Special Master since June 15, 2009. Special Master Feinberg is departing from his position as Special Master, and will be replaced by Patricia Geoghegan. While a report is not required when a Special Master departs, Special Master Feinberg noted that he concluded that such a report was warranted because (i) executive compensation practices are a continuing concern and (ii) accountability and transparency are a highest priority for his tenure as Special Master. The final report noted that the program is a success, as of the seven firms initially subject to the Office of Special Master’s jurisdiction, two have completed repayment and three more have begun to do so. Special Master Feinberg also noted that he is encouraged and hopeful for the eventual repayment of the four firms that remain in the program.

Special Master Feinberg noted findings of the review that he was required to undertake pursuant to Section 111(f) of the Emergency Economic Stabilization Act of 2008, and Treasury regulations (31 C.F.R. 30.16(a)), to determine whether any such payments were inconsistent with the purposes of Section 111 of EESA or TARP, or otherwise contrary to the public interest. Special Master Feinberg did not determine that any reviewed payment was inconsistent with the public interest standard, but did proposed a voluntary policy for all TARP recipients to adopt a prospective compensation policy that would provide companies with the authority to alter pending payments to executives in the event of a financial crisis.

In addition, Special Master Feinberg made the following recommendations for the future of the program:

  • Limit guaranteed cash;
  • Demand a performance component for most compensation;
  • Focus on long-term value creation;
  • Stop excessive perquisites and other giveaways;
  • Hold the line on cash salaries; and
  • Continue the constructive dialogue with the leadership, advisors and directors of the firms.