Clawback Rule Proposed by Securities and Exchange Commission
In his Executive Compensation column, Joseph E. Bachelder III writes that the SEC's proposed rule, issued in July, reaches much farther than existing clawback practices and, once it is finalized, many senior level executives of major corporations will, for the first time, face the risk of "no-fault" clawback of part of their compensation.
September 17, 2015 at 04:22 PM
17 minute read
On July 1, 2015, the Securities and Exchange Commission issued Proposed Rule 10D-1 relating to so-called “clawbacks” pursuant to Section 10D of the Securities and Exchange Act of 1934 (the Exchange Act).1 Section 10D of the Exchange Act was added by Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank).2
(On Aug. 5, 2015 the SEC issued its final rule requiring the disclosure of the ratio of the annual pay of the CEO to the median annual pay of all employees (excluding the CEO).3 Issuers subject to the rule must comply with it for the first fiscal year beginning on or after Jan. 1, 2017. The pay ratio rule will be the subject of a future column.)
Proposed Rule 10D-1, reflecting the statute, directs stock exchanges to require that each listed company adopt a clawback policy and to delist any company that does not adopt, disclose and implement such a policy.4
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