Clawback Prevalence Continues to Rise in Fortune 100

Aug. 25, 2010 - PRLog -- Redwood Shores, Calif. - Equilar, the market leader in executive compensation data and research, has published an article on trends in clawbacks for Fortune 100 companies, which indicates that the percentage of these companies with a clawback policy has risen in recent years, from 17.6 percent in 2006 to 82.1 percent in 2010.

The recently passed Dodd-Frank Act will have a major impact on clawback policies, barring companies without such policies from being listed in any national securities exchange or association. Dodd-Frank requires executives to reimburse their company if a financial restatement occurs, regardless of any misconduct on the part of the executive. This is significantly more stringent than the Sarbanes-Oxley clawback policy, which only ties clawbacks to a financial restatement caused by misconduct.

Some other notable data from the report:

•   81.3% of 2010’s policies had a provision for clawbacks in the event of a financial restatement, 78% had provisions in the event of unethical behavior by an executive, and 63.7% had both.

•   Equity is joining pay in eligibility for clawbacks: The first clawback policies mainly focused on cash incentives, but 81.5% now cover equity incentive compensation, and 26.1% cover outstanding options. Cash incentives still lead the covered items, with 87% covered. The prevalence of CEOs receiving only stock fell 1.6 percent in 2009, while the prevalence of CEOs receiving a mix of stock and options fell 6.8 percent.  

•   Financial and insurance companies were most likely to have clawbacks. 90.5% of F100 financial and insurance companies have a clawback policy in 2010, compared to 82.4% in 2009 and 50% in 2008. This is partially because TARP requires clawback policies for senior executives.  

•   2009 was the biggest year yet for creating or amending a clawback policy. 44.2% of the companies that had a clawback policy either introduced or amended it in 2009. In 2010, 30.8% of companies introduced or amended a policy.

The complete report is provided to all Equilar Knowledge Network subscribers. Non-subscribers can request a copy of the report by visiting
http://www.equilar.com/knowledge-network/research-reports...

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