The Securities and Exchange Commission voted 3-2 today to propose a rule that would require exchanges to establish standards for revoking executive bonuses when companies restate earnings. The rule is the SEC’s last executive compensation rule to be proposed under the Dodd-Frank Act.
Under the rule, publicly listed companies would be required to establish and enforce policies to claw back executive bonuses when the firms make accounting errors leading to restatements of earnings, regardless of the executive’s fault. The clawback would apply to incentive-based compensation that is tied to accounting-related measures, stock prices or total shareholder return.
The clawback window would extend for three years after the bonus is given. All listed companies — regardless of size and excepting certain mutual funds, would be required to adopt such policies. The comment period closes 60 days after the rule is published in the Federal Register. For more information, contact ABA’s Hu Benton.
