Many experts are encouraging “holdbacks,” which allow a company to allocate funds but delay actual payment for executives, as more efficient and effective than “clawbacks,” or attempts to recoup unearned income after an earnings restatement.
In my last entry, I said Dodd-Frank does not mandate “clawbacks,” and that “holdbacks” are a far more efficient and effective way to ensure that your company has a recoupment policy in place that can both comply with Dodd-Frank and diffuse systemic risk.
Clawbacks are a post-payout approach that attempts to recoup unearned income after an earnings restatement. Clawbacks do not necessarily work in favor of shareholder interests; when the corporation seeks to recoup an executive’s unearned compensation, it may well come up empty, for legal reasons or because the executive may have spent the bonus and isn’t able to repay it.
See full Article.
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