Clawbacks: Challenges, Pitfalls, and Trends

Clawbacks came into the spotlight as a result of Sarbanes-Oxley, but have only recently gained notoriety as a result of corporate scandals and boards voluntarily enacting far-reaching clawbacks covering actions such as excessive risk-taking and creating reputational harm. These clawbacks must be designed carefully to avoid enforcement challenges and accounting problems.

Moreover, as action by the SEC is now expected on the Dodd-Frank clawback rules, we can expect to see a much broader clawback mechanism at all companies while larger companies continue to voluntarily implement more customized provisions.

Takis Makridis (Equity Methods) and David Thomas (Wilson Sonsini) discuss these ideas in the March/April issue of The Corporate Governance Advisor.

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