Corporate Governance

2018 Corporate Governance & Execution Compensation Survey

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Page 88 of 109

CLAWBACK POLICIES Shearman & Sterling LLP Clawback Policies | 87 require fraud or misconduct related to the financial restatement 34 50 do not require fraud or misconduct TRIGGERS The Dodd-Frank Act requires recoupment of compensation upon an accounting restatement due to material noncompliance with any financial reporting requirement. The SEC's proposed rules interpret material noncompliance to mean any error that is material to previously filed financial statements. The restatement need not result from fraud or misconduct by the issuer or any of its employees. *The policies at 26 of the Top 100 Companies use multiple triggering events. 4 13 12 84 45 Financial restatement Fraud or misconduct relating to financial statements (no restatement) Materially inaccurate financial statements (no restatement) Compliant with proposed rule Employee subject to the recoupment engaged in fraud or misconduct Triggers at the Top 100 Companies include:* Although rules implementing Section 954 of the Dodd-Frank Act have yet to be finalized, many of the Top 100 Companies voluntarily maintain clawback policies. Proxy advisory groups strongly encourage public companies to adopt clawback policies as an element of sound corporate governance and risk mitigation. Issuer policies, however, are not uniform, and their application varies as to the events that trigger recovery, culpability standards, the individuals covered, the types of compensation subject to recovery, the level of board discretion as to whether to seek enforcement and the time period covered by the recovery policy. CLAWBACK POLICIES of the Top 100 Companies publicly disclose that they maintain a financial-related clawback policy 92

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