Policies that allow companies to recoup ill-gotten compensation from executive officers have enjoyed a surge in popularity over the past three years at America’s largest companies. These policies, often called “clawbacks,” are now at the center of Washington’s financial-sector rescue plan. Along with strict limitations on the tax deductibility of pay, mandates to reduce severance payouts, and warnings not to reward excessive risk-taking, clawback policies are seen as an essential element in the toolkit for fixing compensation programs at troubled companies. It is clear that clawback policies are a critical compensation and corporate governance issue for companies of all sizes to consider.

In our just-released 2009 Fortune 100 Clawback Policy Report, we found that clawback policies are now the norm, and disclosures are getting much more clarity. In the past year, there was significant pressure to add clawback policies, but many companies have left the definitions of those policies loose. Increasingly, organizations have focused on clearly defining their clawback policies and associated triggers.

With clawbacks rising to the forefront of public discussion, the need to understand clawback policy design has never been greater. The report shows that clawback policies are increasingly complex, broader in scope, and much more likely to affect all compensation vehicles.

Some of the key findings of the report included:

• Clawback policies continue to grow in prevalence. From 2006 to 2009, the prevalence of Fortune 100 companies with publicly disclosed clawback policies increased from 17.6 percent to 72.9 percent. The majority of these policies allow companies to take back compensation in the event of a financial restatement or ethical misconduct.
• Adoption and amendments of clawback policies peaked in 2009. Among Fortune 100 companies that disclosed the implementation date for their clawback policy, 94.9 percent adopted or amended their clawback policy in calendar year 2006 or later. Of that group, 33.3 percent adopted or amended their clawback policy in calendar year 2009.
• Most clawbacks are triggered by ethical or financial misconduct. In 2009, 80 percent of Fortune 100 clawback policies included provisions allowing for the recovery of compensation in the event of a financial restatement. Moreover, 85 percent of clawback policies have provisions allowing companies to recoup pay in the event that an executive behaves unethically. In 2009, 67.5 percent of Fortune 100 clawback policies included provisions concerning both financial restatement and ethical misconduct.

The complete report is provided to all Equilar customer subscribers through Equilar’s Knowledge Center. Non-subscribers can request a copy of the report by clicking here.

In this week’s Executive Compensation Trends, we highlight some early findings from our upcoming Clawbacks report. We looked at Fortune 100 companies with clawback policies to assess the latest trends. We found that out of 37 companies with clawback policies, 24 had amended or implemented them during 2008 and 2009.

Clawback policies are primarily used to deter management from taking actions that could potentially harm the financial position of a company. Clawback policy triggers range from violation of non-compete provisions, ethical violations, executive misconduct and even termination of employment shortly after the exercise of stock options or vesting of restricted stock. Among companies with clawback policies amended or created in 2008 and 2009, 79.2 percent had triggers in at least two categories.

It’s also important to note that clawbacks aren’t restricted to NEOs.

Check out this week’s Executive Compensation Trends here.

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Last week we released our annual Executive Stock Ownership Guidelines report, and today, we followed-up with the director guidelines. Not many suprises here, but like the executive guidelines, both required some updating in this challenging economic environment

Released today with the Executive Compensation Trends newsletter, the report covered 240 filing companies and found that 186 of those companies disclosed ownership policies.

A few notable findings:

• The prevalence of ownership policies was 82.1 percent.
• There was an increase in holding requirements, to nearly 20 percent of companies.
• 57.5 percent of companies defined ownership guidelines as a multiple of the annual retainer.
• There was a significant increase in disclosures of hardship provisions.
• The median target ownership for directors was $250,000.

The complete report is provided to all Equilar customer subscribers through Equilar’s Knowledge Center. Non-subscribers can request a copy of the report here.

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On a daily basis, we field inquiries from media sources from Fortune magazine to The Wall Street Journal. Typically, they ask us to provide research on a story they are finishing up, or to substantiate/refute a new trend they might be seeing. The results speak for themselves: in the last two weeks alone, our research has been featured in executive compensation news from CNBC, Reuters, USA Today, Fortune, CNN, CBS, The Washington Post, and more.

One of our most popular client benefits is our “Behind the Numbers” report, which is offered to all subscribers. In this section, we expose the methodology behind the compensation data we deliver to the media. Here’s an example from an August 24th Wall Street Journal article, “Valeant CEO’s Pay Package Draws Praise as a Model.”

The article cites Equilar research as follows: “Several concerns controlled by private equity failed recently, including Chrysler Group LLC. Former Merrill Lynch & Co. CEO John Thain bought more than $11 million of shares during his first year, according to pay researcher Equilar, Inc.”

Providing the media with that one piece of data on compensation might seem easy, but plenty of work goes into finding those numbers. We rely on our extensive compensation database and our top-notch researchers to find the data, ensuring that the numbers are triple-checked for consistent multi-year valuations. Here’s how we described the resulting $11 million of shares in our “Behind the Numbers” section.

In a recent study for The Wall Street Journal, Equilar analyzed purchases of common stock made by chief executive officers among the Russell 3000 companies between 2006 and 2008. Only CEOs that served for at least one year and who joined their company during that time frame were included. Purchases that resulted in indirect ownership of the shares were excluded from the study.

Equilar analyzed a total of 291 CEOs, 43.0% of which purchased shares within their first year. The median value of stock purchased was $169,598 and the median number of stock was 19,300 shares. The 5 highest values of stock purchased by a chief executive in the first year can be found below:

• John Thain (Merrill Lynch): $11,250,000
• J. Michael Pearson (Valeant Pharmaceuticals): $4,999,977
• Philippe P. Dauman (Viacom): $4,994,288
• Ronald J. Kramer (Griffon): $4,550,100
• Dean Jernigan (U-Store-It Trust): $4,366,020

The next time you read about compensation figures, we hope you’ll remember how much work went into assuring their accuracy. Feel free to challenge us if you see a number that leaves you scratching your head.