Clawback Policies Get More Clarity in 2009

Nov. 18, 2009 - PRLog -- Equilar, the market leader in executive compensation data and research published an analysis of Fortune 100 clawback policies. The Equilar 2009 Clawback Policy Report covers 96 public companies.

Policies that allow companies to recoup ill-gotten compensation from executive officers have enjoyed a surge in popularity over the past three years at America’s largest companies. These policies, often called “clawbacks,” are now at the center of Washington’s financial sector rescue plan. Along with strict limitations on the tax deductibility of pay, mandates to reduce severance payouts, and warnings not to reward excessive risk taking, clawback policies are seen as an essential element in the tool-kit to fix compensation programs at troubled companies. It is clear that clawback policies are a critical compensation and corporate governance issue for companies of all sizes to consider.

With clawbacks rising to the forefront of public discussion, the need to understand clawback policy design has never been greater. The Equilar 2009 Clawback Policy Report shows clawback policies are now increasingly complex, broader in scope, and much more likely to affect all compensation vehicles.

Some of the key findings of the report included:

•   Clawback Policies Continue to Grow in Prevalence: From 2006 to 2009, the prevalence of Fortune 100 companies with publicly disclosed clawback policies increased from 17.6 percent to 72.9 percent.  The majority of these policies allow companies to take back compensation in the event of a financial restatement or ethical misconduct.

•   Adoption and Amendments of Clawback Policies Peak in 2009: Among Fortune 100 companies that disclosed the implementation date for their clawback policy, 94.9 percent adopted or amended their clawback policy in calendar year 2006 or later.  Of this group, 33.3 percent adopted or amended their clawback policy in calendar year 2009.

•   Most Clawbacks are Triggered by Ethical or Financial Misconduct: In 2009, 80 percent of Fortune 100 clawback policies included provisions allowing for the recovery of compensation in the event of a financial restatement.  Moreover, 85 percent of clawback policies have provisions allowing companies to recoup pay in the event that an executive behaves unethically.  In 2009, 67.5 percent of Fortune 100 clawback policies included provisions containing both financial restatement and ethical misconduct triggers.

The complete report is provided to all Equilar customer subscribers through Equilar's Knowledge Center. Non-subscribers can request a copy of the report by visiting http://www.equilar.com/Executive_Compensation_Reports.php.

# # #

Equilar's award-winning product suite is the gold standard for benchmarking and tracking executive compensation, board compensation, equity grants and award policies and compensation practices. Equilar products and custom research services enable corporations, human capital consulting firms, law firms, investors, individual executives, and the media to accurately compare pay packages across thousands of public companies using SEC and exclusive survey data. Equilar research is cited frequently by Bloomberg, BusinessWeek, Reuters, The New York Times, The Wall Street Journal and other leading media outlets. Equilar (Redwood Shores, CA) was recognized recently as one of the fastest-growing private companies in America by Deloitte, Inc., and the Silicon Valley Business Journal.