Foley & Lardner's "Compensation Clawbacks: Trends and Lessons Learned" provides an overview of the types of clawback triggers larger companies are commonly including in their voluntarily adopted clawback policies and lessons learned from recent litigation, which may inform other companies' approaches and practices. Among the triggers addressed are financial restatements that are not the result of executive misconduct; events (e.g., unethical business practices, problematic corporate cultures, or #MeToo harassment) that would result in reputational or other non-financial harm; failures in supervision or identification and elevation of risks; and violation/breach of a policy or noncompetition or similar agreement.
Based on recent litigation, companies are advised to consider addressing in their clawback policies the advancement of legal fees and indemnification in the event of litigation, and to carefully and thoroughly investigate the facts before paying severance benefits in connection with a termination, which may otherwise warrant a clawback.
The piece also includes a summary of policies or positions taken by ISS, Glass Lewis, BlackRock, CalPERS, and CII about company clawback policies.
Access additional resources on our Clawbacks page. This post first appeared in the weekly Society Alert!