Terminating an Executive Officer After TARP Funding

Terminating an Executive Officer After TARP Funding

Do TARP funds affect the termination of an executive officer?

By Carl Stanford

What are TARP funds?

The Troubled Asset Relief Program (TARP) is a financial aid scheme established under the presidency of George W. Bush, which enables the US government to acquire equity in private US companies. More information on TARP can be found through the US Department of the Treasury.

What are the consequences for terminating an executive officer in a firm that has accepted TARP funds?

TARP funds don’t prevent a firm from terminating the position of its executive officer. However, TARP funds do carry restrictions on the payment of executive remuneration and severance packages. In particular, senior executive officers aren’t entitled to severance packages at all.

In addition, bonuses may have to be repaid if they were based on inaccurate data, and an executive officer can’t escape this requirement by leaving.

These rules apply only to US companies that received funds from the US government under the Troubled Asset Relief Program.

Different rules apply to companies that received government assistance funds in other countries.