Clawback Policies at Top Companies Need Revision: Study

By Michael Greene

Dec. 10 — Large U.S. companies may need to revise their policies as the Securities and Exchange Commission moves towards a final clawback rule, a recent study suggests.

According to a report released this month by compensation advisory firm Frederic W. Cook & Co., many companies have clawback policy features that are inconsistent with the SEC's proposed requirements.

Cimi Silverberg, a principal at the firm who assisted with the study, told Bloomberg BNA in an interview Dec. 10 that the corporate policies differ specifically on recovery triggers and the level of discretion accorded to boards.

The report discussed compensation-related governance practices through a review of public documents filed with the SEC by the top 250 companies in the S&P 500 as of March 31.

Final Rules Soon?

On July 1, a divided SEC proposed a rule in which national securities exchanges would establish listing standards requiring issuers to adopt clawback policies.

The requirements are mandated by the Dodd-Frank Act.

Last month, SEC Division of Corporation Finance Director Keith Higgins said the division is preparing final recommendations on the agency's clawback, hedging and pay-for-performance proposals.

Among other findings, the Frederic Cook study said 46 percent of the companies examined had clawback policies that are subject to compensation committee discretion. Silverberg noted that under the SEC's proposal, companies aren't permitted to include board discretion in their clawback policies.

Additionally, 39 percent of the companies had clawback policies that only allow recovery of compensation when there is fraud or misconduct on the part of the executive. “However, under the Dodd-Frank rules, the clawback policy will be triggered by any financial restatement, even if no fraud or misconduct occurred,” Silverberg said.

Named Executive Officers

In other highlights, the study found that 90 percent of the companies have a clawback policy that covers one or more named executive officers, and 78 percent have one that covers other current executives. It also found that almost three-quarters (73 percent) of the companies employ both anti-hedging and anti-pledging policies.

Moreover, 92 percent had a policy that prohibited hedging, whereas 74 percent had a policy that prevented executives from using company stock as collateral for a loan, the study said.

To contact the reporter on this story: Michael Greene in Washington at

To contact the editor responsible for this story: Yin Wilczek at

For More Information


The report, “Corporate Governance Study,” is available at