Last week, the Society, with support from our Securities Law Committee, submitted this comment letter in response to the SEC’s reopening of the comment period for the Dodd-Frank Act clawback proposal, which we previously reported on here. In addition to reiterating points made in our comment letter in response to the 2015 proposal, the Society addressed several additional questions raised for consideration in the re-release, including the proposed expanded scope of the clawback requirement and more expansive disclosure.
As detailed in the letter, the Society recommends:
- The scope of the rule be limited to restatements that are material to prior period financial statements
- The rule be limited to principal officers and those who contributed directly to a restatement
- The rule not limit the discretion of the compensation committee
- The rule not require companies to provide additional disclosure on recoverable amounts beyond that provided to the relevant exchanges where they are listed
- The rule not apply retroactively, and that it include an exception for compensation paid pursuant to existing agreements
- The trigger for the look-back period exclude the subjective “reasonably should have concluded” standard
The Society’s letter also notes that widespread adoption of clawback policies since the proposed rule was released in 2015, among larger companies in particular, warrants flexibility in application. Additional comment letters are here.
Access additional resources on our Clawbacks page.
This post first appeared in the weekly Society Alert!