The Long Arm of the Claw

Abstract

ll public companies traded on U.S. stock exchanges will soon be required to have a clawback policy in place. Prior to the new law, a clawback provision required the top two executives at a publicly traded company to reimburse the company for any incentiveor equity-based compensation received over a certain period of time if that company had to issue a financial restatement as a result of company misconduct. But significant changes are coming, as dictated by the Dodd–Frank Wall Street Reform and Consumer Protection Act. The upshot for investors will depend on the details of the final regulations, which are still to be determined.