SEC Staff Working on ‘Tricky Issues' In Release on Clawbacks, Official Says

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By Yin Wilczek

June 19 — The Securities and Exchange Commission staff is working on a number of “tricky issues” related to a recommendation on clawbacks, a senior official said June 19.

David Fredrickson, chief counsel of the SEC Division of Corporation Finance, said such issues include the scope of incentive-based compensation and executive officers to be covered under the release.

“There are many tough issues,” but “we're hopeful that something will be available soonish,” Fredrickson said. “Everyone will have an opportunity to comment on it and I’m sure this one will be as popular as all the others.”

Fredrickson added that the staff also is “very hopeful” about getting executive compensation-related proposals that have been put out for comment “done” and to “move on.”

Fredrickson spoke at a question-and-answer session at an ALI-CLE executive compensation conference. He said he voiced his own views, and did not speak for the commission or other staff members.

Dodd-Frank Mandates 

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC is required to write rules on chief executive officer pay ratios, pay for performance, employee hedging and clawbacks. In addition, the agency must direct the exchanges to write listing standards in which issuers must disclose their clawback policies and actually recover excess incentive-based compensation paid to executives.

The SEC already has proposed pay ratio, hedging and pay-for-performance rules. The agency has yet to propose a clawback requirement.

According to some recent reports, the commission may be moving ahead on pay ratio and clawbacks in the near future.

Fredrickson did not give specific timeframes in his comments.


The SEC official also discussed several questions posed to the staff by the American Bar Association's Joint Committee on Employee Benefits this year. Among other questions, the staff was asked whether former emerging growth companies (ECGs) are exempt from say-on-frequency votes.

While the Jumpstart Our Business Startups Act expressly temporarily exempts former EGCs from say-on-pay, the statute is silent on say-on-frequency.

Fredrickson noted that the answer to the question has divided the bar and even the SEC staff. However, the answer is no: former EGCs are not exempt from holding a shareholder advisory vote on the frequency of say-on-pay voting, he said.

“Our best answer is that once the company loses its EGC status,” it should hold a frequency vote the next year, he said, adding that Corp. Fin. will issue a compliance and disclosure interpretation (C&DI) “to let everyone know our views.”

Compensation Disclosures 

Fredrickson also told the audience that executive compensation-related disclosures are “getting much better.”

“I think there’s been a great evolution,” Fredrickson said. He noted that the high level of shareholder engagement has shone a spotlight on compensation issues, and “everyone is now a little more sensitive and careful.”

In addition, corporate counsel are taking such issues more seriously, recognizing that good disclosure that addresses matters “they are hearing from their shareholder base can yield dividends,” he said.

To contact the reporter on this story: Yin Wilczek in Washington at

To contact the editor responsible for this story: Ryan Tuck at

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