SEC proposes new compensation clawback rules

Purpose – To examine the proposed rules issued by the Securities and Exchange Commission (SEC) pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which, if adopted, would require national stock exchanges to establish listing standards that would require listed issuers to adopt so-called clawback policies for the recovery of excess incentive-based compensation in the event that an issuer is required to prepare an accounting restatement resulting from material noncompliance with any financial reporting requirement. Design/methodology/approach – The article discusses the SEC’s proposed rules, including the circumstances that would require recovery of excess incentive-based compensation, the types of compensation that, and the individuals whose compensation, would be subject to recovery, and certain new disclosure requirements for listed issuers. Findings – The SEC’s proposed rules will, if adopted, impose additional burdens on listed issuers to adopt and comply with recovery policies for excess incentive-based compensation and adhere to new public disclosure requirements. Originality/value – Expert analysis from experienced securities and executive compensation lawyers.