Although more companies are insisting on clawback provisions in executives’ contracts, their effectiveness as a tool to recoup bonuses and other compensation when things go bad remains to be seen. Some critics view them as legally questionable and point to, among other obstacles, conflicts with state wage laws that could be used to stymie a company’s attempt to reclaim pay.
Posts Tagged ‘clawbacks’
Expert Perspective
Are There Really Any Teeth in These Claws??
Expert Perspective by Grahall’s OmniMedia Editorial Board
Stephen Gandel says in his January 27, 2009 article in Time Magazine (Can Financial Firms Get Executives to Give Back Pay?): “In the past few months, a number of financial firms have instituted or beefed up rules that would allow them to force employees to return year-end bonuses. So-called clawbacks would be triggered by subsequently discovered misconduct and some firms say they may even apply in cases where employees made trades that looked profitable at first, but go sour… While companies have always had the right to sue employees for ill-gotten gains, more firms are adding provisions to reclaim pay not just for illegal behavior, but poor decisions.”
While this sounds good, clawbacks are difficult to implement for several reasons
Continue reading “Are There Really Any Teeth in These Claws??” »
Newsfeeds
Wall Street Toughens Rules on Clawbacks
Banks and securities firms are toughening rules that give them power to seize pay from employees whose bets or other actions blow up later. But they still mightn’t be tough enough. Known as clawback provisions, such internal rules used to cover just top executives or fraud.
Newsfeeds
Can Financial Firms Get Executives to Give Back Pay?
Published in Time January 27, 2010 by Stephen Gandel
In the past few months, a number of financial firms have instituted or beefed up rules that would allow them to force employees to return year-end bonuses. So-called clawbacks would be triggered by subsequently discovered misconduct and some firms say they may even apply in cases where employees made trades that looked profitable at first, but go sour.
Newsfeeds
Spending Bonus Cash Becomes Risky as Clawbacks Spread (Update1)
Many U.S. executives opening their 2009 bonus envelopes will find something extra this year: more conditions on whether they can keep their money or stock. That’s because a growing number of companies are inserting clawback provisions in employment agreements, which puts incentive cash or stock at risk of being rescinded in the future, said Mark Poerio, co-chair of the executive compensation practice in the Washington office of law firm Paul, Hastings, Janofsky & Walker LLP.
Newsfeeds
Wall Street’s bonus baby steps
Published in CNN Money, December 30, 2009 by Collin Barr
So much for Wall Street sobering up.
Under pressure to prevent another meltdown, Goldman Sachs (GS, Fortune 500) and Morgan Stanley (MS, Fortune 500) have been cutting back on cash bonuses and insisting on so-called claw-backs — arrangements that allow companies to reclaim past bonuses when there is employee misconduct.
Yet for all their supposed reform-mindedness, the banks show no sign of pulling the emergency brake on the great compensation escalator.
A year after taxpayers saved the finance industry from collapse, the big banks will hand out billions of dollars in bonuses in the coming weeks — at a time where unemployment tops 10% and many people are still losing their homes to foreclosures. To say this rankles in some quarters is an understatement.
Newsfeeds
CEO of Beazer Receives SEC Notice
http://online.wsj.com/article/SB10001424052748704431804574539631426818194.html?mod=rss_law
NOVEMBER 16, 2009, 11:31 P.M. ET
CEO of Beazer Receives SEC Notice
By DAWN W OTAPKA And MARK MAREMONT
The Securities and Exchange Commission may move to claw back a portion of the compensation Beazer Homes USA paid its chief executive during a period for which the company later restated earnings.
The Atlanta builder disclosed Monday that Ian J. McCarthy received a Wells notice from the SEC, indicating that the agency’s staff is recommending civil action against the executive.
Such a move would mark the first time the agency has tried to claw back pay from a sitting CEO who wasn’t alleged to have participated in a corporate fraud. But in recent months it has sued at least two former executives for back pay even though they weren’t implicated in wrongdoing, a sign the agency is using the tactic more aggressively.
Published in The Wall Street Journal November 16, 2009 by Dawn W Otapka and Mark Maremont
The Securities and Exchange Commission may move to claw back a portion of the compensation Beazer Homes USA paid its chief executive during a period for which the company later restated earnings.
The Atlanta builder disclosed Monday that Ian J. McCarthy received a Wells notice from the SEC, indicating that the agency’s staff is recommending civil action against the executive.
Such a move would mark the first time the agency has tried to claw back pay from a sitting CEO who wasn’t alleged to have participated in a corporate fraud. But in recent months it has sued at least two former executives for back pay even though they weren’t implicated in wrongdoing, a sign the agency is using the tactic more aggressively.
Expert Perspective
Don’t be Fooled
Expert Perspective by Grahall’s OmniMedia Editorial Board
Rick Newman’s September 23rd article “Outlandish CEO Pay: How to Fix the Problem” published in Seeking Alpha summarizes, simplistically, the problem of excess CEO pay and the possible solutions to this problem, recounting the problems faced by Merrill Lynch, Citigroup and AIG following poor leadership by Stan O’Neal, Charles Prince and Martin Sullivan, respectively. Newman’s point being these Wall Street icons made millions (and millions) while the companies they led lost billions.
Although overly simplified, we don’t disagree with most of what Newman says – in particular, linking pay to long term performance and establishing claw backs as standard protocols in executive contracts. Grahall’s approach to structuring executive compensation packages is to link pay to events. In many companies there is a mismatch between these elements.
Continue reading “Don’t be Fooled” »
Newsfeeds
New SEC Action: Bank CEOs, CFOs Vulnerable to Compensation Clawback for Acts of Others
Published in FinCriAdvisors.com September 9, 2009
Performance-based compensation of bank CEOs and CFOs at public companies has been left vulnerable to “clawback” forfeiture under a new position staked out by the SEC. The agency has demanded that a CEO surrender $4.1 million because of staff misconduct he did not know about that led to a restatement of financials.
Newsfeeds
US Pay Czar Says He Can ‘Claw Back’ Exec Pay
Published in CNBC.Com Monday, 17 August 2009 by Reuters
Kenneth Feinberg, the Obama administration’s pay czar, said on Sunday he has broad and “binding” authority over executive compensation, including the ability to “claw back” money already paid, and he is weighing how and whether to use that power.
Link to full article.