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2.15 Recovery of Compensation from Senior Executives and Directors

<< Title II Overview

2.15 Recovery of Compensation from Senior Executives and Directors

 

 


2.15.     Recovery of Compensation from Senior Executives and Directors.  The Act provides that the FDIC, as a receiver for a covered financial company, may recover from any current or former senior executive officer or director that is substantially responsible for the failed condition of the company any compensation received during the 2-year period preceding the receivership, except that no time limit will apply in the case of fraud.  This provision diverges from accepted legal concepts by triggering liability based on a person's "responsibility" for a company's condition, rather than on some level of culpability such as negligence, gross negligence, or willful misconduct.  A person might be deemed to be responsible for a company's condition as a result of a particular business decision, but that decision might not be deemed to have been negligent or might be protected by the business judgment rule.  [§210(s)]

The FDIC is required to issue regulations to implement the compensation recovery provision. The regulations are required to define the term "compensation" to include financial remuneration such as salary, benefits, severance, deferred compensation, golden parachute benefits, and any profits realized from the sale of company securities. .