Summary
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 Corporate
policies and compensation arrangements that provide for recoupment or "clawback"
of executive pay as consequence of certain behavior or circumstances
- e.g., Recovery of bonus payments, stock
option gains and other performance-based compensation, and profits from sale of
issuer securities
- e.g., Termination "for cause", breach of
non-competition provisions, and certain financial restatements
In
response to
Section 304
of Sarbanes-Oxley Act and In re HealthSouth Corp. Shareholders Litigation
decision
- SOX Section 304 requires CEO and CFO to return
bonus payments (or other incentive-based or equity-based compensation) and gains
from sale of issuer securities in event of certain financial restatements
- In re HealthSouth Corp. Shareholders
Litigation,
845 A.2d 1096 (Del. Ch. 2003), affd  847 A.2d 1121
(Del. Supr. 2004), rescinded transaction in which CEO repaid company loan with overvalued stock
Executive
compensation disclosures must now include CD&A discussion of compensation
recovery policies
- Regulation S-K Item 402(b)
- [Discussion of] company
policies and decisions regarding the adjustment or recovery of awards or
payments if the relevant company performance measures upon which they are based
are restated or otherwise adjusted in a manner that would reduce the size of an
award or payment
Clawback
policies have also been subject of shareholder proposals
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Precedent "Clawback" Disclosures
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 2008
Proxy Statements
- Policy adopted in February 2007
- Increased "clawback" protection proposed
for 2005 Long-Term Incentive Plan
2007
Proxy Statements
- Clawback provisions
relating to stock option, restricted stock and long-term performance awards
-
Board policy to seek reimbursement of annual incentives (with
interest) if executive engaged in misconduct that caused or partially caused
restatement of financial results
- See also company discussion
in response to
stockholder proposal
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Board policy to recover executive pay based on financial results or
operating metrics satisfied as result of fraudulent or illegal conduct and, to
extent required by Section 304 of Sarbanes-Oxley Act, recovery of CEO and CFO
compensation following financial restatements
- See also company discussion in response to
stockholder proposal
- Clawback of annual bonuses and PSU payouts based
on financial results subject to significant restatement
- For performance year 2007 and thereafter
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Precedent "Clawback" Policies SEC_CODE_REF_0090001192884
Shareholder Proposals
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2008
Proxy Season
2007
Proxy Season
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Sample of proposals submitted by William Steiner, Kenneth Steiner, Edward Olson
and John Chevedden, which call for:
- Adoption of bylaw or policy to recoup incentive payments to senior
executives if corresponding performance targets not achieved; and
- Use of financial restatements as one means for
determination of unearned bonuses
- approved by shareholders
4.26.07
- voting results will be taken under advisement and
reviewed by company
2006
Proxy Season
- Adoption of policy to recoup management bonuses based on
significant restatement of financial results
or significant extraordinary write-off
- Adoption of policy to recoup incentive payments to senior
executives if corresponding performance targets not achieved; and
- Use of financial restatements as one means for
determination of unearned bonuses
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Commentary
Related Topics
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