Company-imposed (by contract, policy, or plan)


  • SOX 304 (applicable to CEOs and CFOs)
  • Section 10D of U.S. Exchange Act (Dodd-Frank §954)News


2019.09  The Faithless Servant Doctrine: Can an Employer Claw Back Compensation from an Employee Who Binge-Watches “Friends” During Work Hours? This clever alert cites two cases illustrating potential employer claims against employees who disregard their duties.

2019.07.07  #MeTOO, CLAWBACKS AND EXECUTIVE COMPENSATION IN 2019. This 161-page PDF presents a substantively rich survey covering topics organized under these headings: (1) Incidence of Sexual Harassment as “Cause,” (2) Clawbacks Where Sexual Harassment is “Cause” for Termination, (3) Proxy Voting Policies and Clawbacks, (4) Shareholder Proposals and Disclosure of Recouped Amounts, and (5) Arbitration Provisions (relating to sexual harassment). 

2019.0613  "The State of Play on Clawbacks and Forfeitures Based on Misconduct." -- This Pillsbury alert provides extensive analysis and data about clawback and forfeiture practices and policies, including the views of institutional investors.

2013.Dec.19  Insider Trading + Cover-up = $31 Million Forfeiture
Clawback claims have generally been few under SOX, but state law can certainly provide robust recourse against misbehaving employees. New York's Faithless Servant Doctrine provided the vehicle in Morgan Stanley v. Skowron, in which the S.D.N.Y.'s decision reviews applicable law and applies it to an executive who had received significant compensation pursuant to his employment agreement. The court refused to insulate any compensation from recovery, finding a task-by-task exception wholly inapplicable.

2013.May.1  Discretionary Clawbacks at Work (in contrast to Dodd-Frank §954).   A recent Wall Street Journal article (“Blind Spot Covered Ex-Trader’s Trail,” 4/8/2013), describes Morgan Stanley’s plan to claw back $100,000 to $200,000 of deferred compensation as a result of a trader’s guilty plea to charges arising from his work for a prior employer. This proposed clawback suggests a desirable business dynamic, in the sense that employers should have the discretion to decide what circumstances should trigger the forfeiture or repayment of executive compensation. By contrast, Section 954 of the Dodd-Frank Act requires that employers pursue mandatory clawbacks regardless of business judgment or cost-benefit analysis. The vast majority of employers have clawback policies and rights, and there is a healthy move toward deepening them (as evidenced by the recoupment policy that the major pharmas recently approved in conjunction with an investor coalition.) Section 954's misguided mandate is merely getting in the way of healthy governance.  Before there is further waste of SEC or business resources, it would be smart to convert Section 954 into a discretionary right for employers. The fix would be simple, and would remove a drag that current law creates.

2013.Apr.24  Major Pharma Companies Approve Recoupment Policies.  In conjunction with a coalition of 13 institutional investor groups, six major pharma companies have approved compensation recoupment policies that apply when significant company harm arises from misconduct that violates company policies relating to the manufacturing, sales, or marketing of products.