S H E A R M A N & S T E R L I N G L L P
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Thirty-fi ve of the Top 100 Companies have publicly
disclosed that they have a policy recommending
or requiring that executives return a portion of their
performance-based compensation in the event
the company is required to restate its fi nancials.
In the aftermath of the Enron and WorldCom
scandals and the resulting stricter internal controls
and more stringent accounting standards adopted
under Section 404 of the Sarbanes-Oxley Act of
2002, there have been a record number of fi nancial
restatements in recent years. These fi nancial
restatements raised a concern that if an executive's
pay was based on fi nancial achievements that
were not actually met, then executives would
receive compensation that they had not earned.
In order to address this issue, many companies
have adopted "clawback policies" that recommend
or require that executives return a portion of their
performance-based compensation in the event
of a fi nancial restatement. The Commission has
emphasized the importance of clawback policies
by recommending that companies include in
the CD&A disclosure regarding their policies and
decisions with respect to the adjustment or
recovery of awards or payments upon a fi nancial
restatement or other similar adjustment.
PERFORMANCE
COMPENSATION
CLAWBACK POLICIES
COMPANIES THAT PUBLICLY 35
DISCLOSED THEY MAINTAIN
A CLAWBACK POLICY
65 COMPANIES THAT HAVE NOT
PUBLICLY DISCLOSED THEY
MAINTAIN A CLAWBACK POLICY
