Among the many provisions of the new Dodd-Frank Wall Street Reform and Consumer Protection Act is a revised policy on clawbacks. While Sarbanes-Oxley required companies to have a clawback policy in the event of a financial restatement caused by executive misconduct, Dodd-Frank takes it one step further, requiring clawbacks for any financial restatement, regardless of whether misconduct occurred. Companies that don’t comply with this regulation will be prohibited from appearing in the national securities exchanges and associations, meaning that we’ll likely see clawback policies adopted universally in 2011 or soon thereafter.
In the meantime, we’ve taken our annual look at how clawback policies shake out in the Fortune 100. These policies continue to be on the rise, with 82.1 percent of companies adopting them. It’s hard to believe that only four years ago, in 2006, a mere 17.6 percent of companies had them. 2009 has been the biggest year yet for clawbacks, with 44.2 percent of companies implementing or amending them, but 2010 is right on its heels with 30.8 percent. A few other statistics from the report:
- 81.3 percent of 2010’s clawback policies had a provision for clawbacks in the event of a financial restatement, 78% had provisions in the event of unethical behavior by an executive, and 63.7 percent had both.
- Financial and insurance companies were most likely to have clawbacks. 90.5 percent of F100 financial and insurance companies had a clawback policy in 2010, compared to 82.4 percent in 2009 and 50 percent in 2008. This is partially because TARP requires clawback policies for senior executives.
- Most clawback policies include key executives and employees. 67.4 percent include this group, while 13.04 percent include all of a company’s employees.
- The first clawback policies mainly focused on cash incentives, but 81.5 percent now cover equity incentive compensation, and 26.1 percent cover outstanding options. Cash incentives still lead the pack, with 87 percent of policies covering them.
To learn more about clawback trends in the Fortune 100, including specific examples of proxy disclosures, request the 2010 report.No tags for this post.