More Companies Reserve Right to Take Back Executive Pay

November 3, 2008 ( - From calendar year 2007 to calendar year 2008, the number of Fortune 100 companies with publicly disclosed clawback policies (provisions allowing companies to recoup executive pay following financial restatement or unethical conduct) increased from 42.1% to 64.2%.

According to a press release from Equilar, provider of executive compensation benchmarking solutions, in 2008, more clawback policies at Fortune 100 companies covered equity incentive compensation than cash incentives (72.1% versus 67.2%) – a stark turnaround from several years ago when these policies were relatively new and the majority focused solely on cash bonuses. Among Fortune 100 companies that disclosed the implementation date for their clawback policy, 91.7% adopted their policy in calendar year 2006 or later, the press release said.

Equilar also found that in the most recent year, 60% of Fortune 100 clawback policies included provisions allowing for the recovery of compensation in the event of a financial restatement, while 72.4% of clawback policies have provisions allowing companies to recoup pay in the event that an executive behaves unethically. In many cases, these triggers are found in the same policy.

Executive compensation has been in the spotlight recently as financial institutions receiving help from the government’s $700-billion bailout must follow guidelines limiting executive pay, including a ban on golden parachutes for departing executives (See Banks Getting Bailout $$ Grilled over Executive Bonuses ).

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