Stay current on changes and developments in corporate law with a wide variety of resources and tools.
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.
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 are not 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.
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 email@example.com
To contact the editor responsible for this story: Yin Wilczek at firstname.lastname@example.org
The report, “Corporate Governance Study,” is available at http://www.fwcook.com/alert_letters/FWC_2015_Corp_Gov_Study_Final.pdf.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)