Pay Versus Performance in TARP Recipient Firms (Troubled Asset Relief Program ‪)‬

INTRODUCTION There has been much discussion in the business press about executive compensation and its alignment to performance and risk-taking, especially since many U.S. companies have received bailout funds from taxpayers (Benjamin & Goldman, 2009). It is widely believed that short-term incentives which stem from executive compensation policies have contributed to the current financial crisis, which began in June, 2007 with the meltdown of two Bear Stearns' hedge funds that speculated in mortgage-backed securities (Sloan 2009; Kropp, 2009). Numerous legislative packages passed by the U. S. Congress in a relatively short period of time have brought unprecedented amounts of bailout money to troubled U.S. companies. Included in the stimulus package totaling $12.2 trillion is the Troubled Asset Relief Program (TARP) which commits up to $700 billion for investment in companies in exchange for preferred stock which is held by the U.S. Treasury.