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Companies Bracing for new SEC Clawback Rules

Chris Gaetano
Published Date:
Oct 13, 2015
SECURITIES-AND-EXCHANGE-COMMISSION-facebookWith the comment period now over, public companies are holding their breath as they await the final form of the Securities and Exchange Commission's new clawback rules, which many businesses fear are overly broad and too vague, according to the Wall Street Journal. Currently, when there's an error in the books, whether placed deliberately or accidentally, the board has discretion over whether to take back performance-backed bonuses from executives. The new rule from the SEC would, among other things, take away this discretion and require that have and enforce policies that allow it to recover incentive-pay rewarded on inaccurate accurate information.

Businesses have expressed concern about this, saying that this could punish people who had nothing to do with the error, or were even aware of it in the first place. The Journal said there was also a concern that the rules offered to little flexibility, and that it was too vague as to what counts as performance-based pay. 

The provision was included as part of the Dodd-Frank Act in order to discourage excessive risk taking and outright fraud, said the Journal. 

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