Treasury's Take on Executive Compensation: It's a Matter of Principles

July 2, 2009

On June 10, 2009, the U.S. Department of the Treasury issued a Statement by Treasury Secretary Tim Geithner on Compensation, which sets forth five broad-based principles on compensation policies and practices applicable not only to financial institutions, but to companies generally, and two Fact Sheets, one entitled “Providing Compensation Committees With New Independence” and the other entitled “Ensuring Investors Have a ’Say on Pay.’” On July 1, 2009, the SEC at its open meeting proposed amendments to disclosure rules for U.S. companies regarding matters of compensation and corporate governance. The below memorandum identifies some of the key practical implications of these materials for purposes of compensation design and the potential reforms to come.