Deadline to adopt clawback policy postponed to December 1
21 June 2023
The stock exchanges amended their proposed listing standards (NYSE and Nasdaq) on clawbacks to give companies until December 1, 2023 to adopt a policy to recoup executive incentive-based compensation (60 days after the October 2, 2023 effective date).
The SEC approved the amended standards on June 9, 2023. The standards mandate that companies recover incentive-based compensation if payments were based on financial statements that were later restated and executives received amounts that otherwise would have been lower. For a detailed discussion of the requirements, see Final SEC clawback rule requires significant changes to policies.
Companies will have to revise their current policies (or create one) to comply with the listing standards. They will also need to determine whether they want to go beyond the minimum requirements to include additional individuals, types of compensation or types of triggers that are not covered by the standards. The delay gives companies more time to make these decisions.
According to a Mercer snapshot survey
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55% of survey participants plan to have a compliant policy only while 45% plan to go beyond the minimum requirements.
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Of the 45% that expect their clawback policy or policies to go beyond the minimum requirements:
- 54% plan to cover a broader group of executives or employees than Section 16 officers.
- 60% plan to cover one or more types of service-based or discretionary equity and cash awards.
- 90% plan to include one or more additional triggers in their clawbacks, such as fraud or intentional misconduct, conduct that causes reputational harm, violation of company policies or code of conduct, and breach of restrictive covenants.