United States: SEC Proposes Executive Compensation Clawback Rule

The Securities and Exchange Commission (SEC) recently proposed rules to implement the executive compensation clawback provisions of Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Section 954).1 The highlights of the proposed rules and rule amendments (Proposals) include:

  • New Rule 10D-1 under the Securities Exchange Act of 1934 (Proposed Rule 10D-1), which would require national securities exchanges and associations to adopt listing standards (New Listing Standards) that would prohibit the initial or continued listing of securities of an issuer that has not adopted and complied with a written compensation recovery policy (Policy) providing that the issuer will recover erroneously awarded incentive-based compensation that is received (1) by an individual who was an "executive officer" at any time during the performance period for such incentive-based compensation (2) during the three completed fiscal years immediately preceding the date that the issuer is required to prepare a restatement of previously issued financial statements due to the issuer's material noncompliance with any financial reporting requirements under the securities laws (Restatement).
  • New Item 402(w) of Regulation S-K (Proposed Item 402(w)), which would require a listed issuer to make extensive disclosures regarding (1) each Restatement completed during its last completed fiscal year that required a recovery of erroneously awarded incentive-based compensation pursuant to the listed issuer's Policy and (2) each prior Restatement as to which a balance of erroneously awarded incentive-based compensation was outstanding during the last completed fiscal year as a result of the application of its Policy with respect to the prior Restatement.
  • New instructions to paragraphs (c) and (n) of Item 402 of Regulation S-K, which would require summary compensation tables to reflect the reduction of any named executive officer's compensation for any year covered by such summary compensation tables as a result of the recovery of erroneously awarded incentive-based compensation under a Policy.

Once the SEC adopts the final version of Rule 10D-1 (Rule 10D-1) and the final versions of the other proposed amendments to SEC disclosure requirements, the exchanges and associations must propose, and the SEC must approve, the New Listing Standards.2 In view of the extensive requests for comments in the Release, the final versions of the new rules and rule amendments may differ from the Proposals. Moreover, exchanges and associations may choose to include requirements in the New Listing Standards in addition to those required by Rule 10D-1. Consequently, issuers will be able to assess the full impact of the Proposals only once the New Listing Standards are approved by the SEC.

Listed issuers would first be required to recover erroneously awarded incentive-based compensation received by their executive officers as a result of the attainment of a financial reporting measure based on or derived from financial information for a fiscal period ending on or after the effective date of Rule 10D-1 and granted, earned or vested after that date. If the SEC acts with unusual swiftness in adopting the Proposals and approving the New Listing Standards, listed issuers would likely first have to recover any erroneously awarded incentive-based compensation received by their executive officers resulting from a Restatement in 2016.

Comments on the Proposals are due by September 14, 2015. Listed issuers and issuers contemplating listing securities on a national securities exchange or association should familiarize themselves with the Proposals and consider commenting on the Proposals' problematic aspects. No matter how persuasive any comments on the Proposals may be, the SEC may conclude that, in light of Section 954's requirements, it does not have the flexibility to address in the final rules, or at least fully address, commentators' concerns. 

Proposed Rule 10D-1

Subject issuers. Proposed Rule 10D-1, the other Proposals and the New Listing Standards would apply to all issuers listing securities for trading on a national securities exchange or for quotation through a national securities association (Listed Issuers), including Listed Issuers that have only debt or preferred securities listed or that are master limited partnerships, emerging growth companies, smaller reporting issuers, foreign private issuers and controlled companies (as defined in the rules of the New York Stock Exchange and the NASDAQ Stock Market). Only those issuers who list only cleared security futures products, standardized options issued by a registered clearing agency and securities of certain registered investment companies would be exempt.

General requirements for a Policy.  A Listed Issuer would be required to adopt and comply with a written Policy that would provide that, if the Listed Issuer is required to prepare a Restatement, it will recover amounts of erroneously "awarded" (i.e., paid) incentive-based compensation if such compensation:

  • was "received" by a person who was an "executive officer" of the issuer at any time during the performance period for that incentive-based compensation; and
  • was received (1) while the Listed Issuer had a class of securities listed on an exchange or association and (2) during the three completed fiscal years immediately preceding the date that the issuer is required to prepare a Restatement to correct a material error.

A Policy would have to require recovery of erroneously awarded incentive-based compensation resulting from a Restatement being made even if restated financial statements would not need to be filed with the SEC and even if an individual to whom such compensation had been awarded was no longer employed by the issuer. Incentive-based compensation would be deemed received in the Listed Issuer's fiscal period during which the financial reporting measure upon which the payment or amount paid under the incentive-based compensation award depends is attained, even if the payment of that compensation (including the issuance of shares) occurs after that period's end.

The amount of erroneously awarded incentive-based compensation to be recovered as a result of an application of a Policy would be equal to (1) the amount of incentive-based compensation received minus (2) the amount of incentive-based compensation that would have been received had the compensation been determined based on the Restatement, which amount would be computed without regard to any taxes paid by the recipients on such compensation (Excess Compensation). Although the amount of the Excess Compensation would be calculated on a pre-tax basis in order to allow Listed Issuers to be made whole for the Excess Compensation subject to recovery, individuals repaying the Excess Compensation to a Listed Issuer would have to pay the amounts they owe with after-tax dollars.3

The Excess Compensation would have to be recovered in accordance with the Policy unless it would be impracticable to do so because the direct expenses of enforcing recovery would exceed the amount to be recovered or the recovery would violate a home country law adopted prior to July 14, 2015.4 Before concluding that any recovery is impracticable based on the expense of enforcement, a Listed Issuer would be required to make a reasonable attempt to recover the Excess Compensation, document such attempt and provide the documentation to its exchange or association. A Listed Issuer's board of directors would not have discretion regarding whether to attempt to recover Excess Compensation under the Listed Issuer's Policy although the board of directors would have discretion as to the means of recovery. The SEC notes in the Release that Listed Issuers should effect each recovery reasonably promptly as undue delay in making recovery attempts would constitute noncompliance with their Policies. Determinations as to the impracticability of recovery would have to be made by the Listed Issuer's compensation committee (all of the members of which must be independent) or, in the absence of such a committee, a majority of the Listed Issuer's independent directors.

Recovery trigger under a Policy.  A Listed Issuer would have to recover Excess Compensation pursuant to its Policy when Excess Compensation occurs as a result of the Listed Issuer being required to prepare a Restatement to reflect the correction of one or more errors that are material to those financial statements and that Restatement results in an adverse change in a financial reporting measure on which the payment of, or the amount of, the incentive-based compensation was determined. Proposed Rule 10D-1 expressly provides that any restatement to correct an error that is material to previously issued financial statements would be deemed to result from material noncompliance of the Listed Issuer with a financial reporting requirement under the securities laws. 

For purposes of Proposed Rule 10D-1, an issuer will be deemed to be required to prepare a Restatement on the earlier of (1) the date on which the issuer's board of directors, a committee of the board or one or more officers authorized to take such action (if board action is not required) concludes, or reasonably should have concluded, that the issuer's previously issued financial statements contain a material error or (2) the date a court, regulator or other legally authorized body directs the issuer to restate its previously issued financial statements to correct a material error. The date specified in the first part of the immediately preceding sentence would generally be expected to coincide with the occurrence of an event that would require disclosure pursuant to Item 4.02(a) of Form 8-K.5

Identifying incentive-based compensation.  For purposes of the Proposals, incentive-based compensation would be any compensation, including stock options and other equity awards, granted, earned or vested based wholly or in part upon the attainment of a financial reporting measure. A financial reporting measure would be one determined and presented in accordance with the accounting principles used by the issuer in preparing its financial statements, any measure derived wholly or in part from such a measure, and stock price and total shareholder return (TSR).6 A financial reporting measure would not need to be a measure presented within the issuer's financial statements or included in an SEC filing, but may be (although they need not be) presented in other disclosures in SEC filings, including in management's discussion and analysis of financial condition and results of operations or the performance graph. Such financial reporting measures would include, but would not be limited to:

  • items shown on the face of financial statements, such as revenues, operating income, net income and earnings per share;
  • liquidity measures, such as operating cash flow;
  • measures calculated using items shown on the face of financial statements, such as working capital and return on assets;
  • non-GAAP financial measures, such as EBITDA and free cash flow; and
  • ratios, such as sales per square foot, revenue per user and cost per employee, that use a financial measure that could be affected by a Restatement as one of the numbers in the ratio.

Under the Proposals, incentive-based compensation would not have to be awarded pursuant to an incentive or other compensation plan in order to be subject to recovery under a Policy. The SEC expects the definition of incentive-based compensation to be "applied broadly and flexibly," but indicates that not all forms of incentive-based compensation would be within the scope of Proposed Rule 10D-1 and the New Listing Standards. Excluded would be incentive plan awards that are granted, earned or vested based solely upon the occurrence of certain non-financial events, such as consummating a merger or divestiture, completing a restructuring or financing or opening a specified number of stores. 

Calculating the amount of Excess Compensation.  In many instances, determination of the Excess Compensation could be relatively simple. For example, when the payment of incentive-based compensation would be contingent on the issuer exceeding a threshold amount of revenue for the performance period relating to the vesting of incentive-based compensation and the exact amount of such compensation to be paid would depend on the amount by which the revenue for such period exceeds the threshold amount. 

In other instances, the determination would be more difficult, particularly where the payment and amount of incentive-based compensation is tied to the issuer's stock prices or TSR for a period and the amount of Excess Compensation is not subject to mathematical recalculation directly from the information in a Restatement. In the instance of incentive-based compensation tied to the issuer's stock price or TSR, an issuer would be permitted to determine the Excess Compensation based on a reasonable estimate of the effect of the Restatement resulting in the Excess Compensation on the Listed Issuer's stock price or TSR.7 Issuers using estimates to determine Excess Compensation would have to maintain documentation of the reasonable estimates and to provide that documentation to its listing exchange or association. 

If incentive-based compensation received in the form of options, shares or stock appreciation rights (SARs) includes Excess Compensation, the amount of the Excess Compensation will be the number of options, shares or SARs the recipient of that incentive-based compensation would not be entitled to receive when the Listed Issuer's actual performance with respect to the applicable performance measure is calculated based on the Restatement.8

Definition of "executive officer."  Proposed Rule 10D-1 specifically defines the term "executive officer" for its purposes, which definition would include the same universe of individuals deemed to be "officers" under Section 16 of the Exchange Act (that is, those individuals required to file Forms 3, 4 and 5 to report beneficial ownership of issuer securities). If an issuer's board of directors has identified an individual as an executive officer in its SEC filings (for example, Form 10-K or proxy statement), it would be presumed that the board has made that judgment and that the individual so identified is an executive officer for purposes of Section 10D, in addition to the individuals enumerated in Proposed Rule 10D-1's definition of "executive officer."9 Listed Issuers would have to be careful not to confuse the term "executive officer" as defined in Proposed Rule 10D-1 with the definition of "executive officer" in Rule 3b-7 under the Exchange Act, which is a narrower definition than that in Proposed Rule 10D-1

Master limited partnerships should note that Proposed Rule 10D-1 expressly provides that, just as under Section 16, if the issuer is a limited partnership, officers or employees of the partnership's general partner who perform policy-making functions for the limited partnership are deemed executive officers of the limited partnership. 

Indemnification against loss of Excess Compensation prohibited. Listed Issuers would be prohibited from indemnifying any current or former executive officer against the loss of any Excess Compensation. This prohibition would appear to extend to the indemnification of such individuals for any taxes such individuals had paid on the Excess Compensation recovered from them and that are not refunded to them.

Disclosure requirements. Issuers would have to file all disclosures relating to their Policies in accordance with federal securities laws. This requirement would be fulfilled by making the disclosures that would be required by Proposed Item 402(w) and other amendments described below. General disclosure principles would apply with respect to an issuer and its Policy, and information regarding the issuer's actions pursuant to its Policy would have to be disclosed if that information is material as to the issuer and would not be otherwise disclosed pursuant to Proposed Item 402(w), the other provisions of Regulation S-K as proposed to be amended or the New Listing Standards.

Limitations on new listing by noncompliant issuers. An issuer having securities delisted because of its failure to comply with the recovery policy of Proposed Rule 10D-1 would not be able thereafter to list its securities on any exchange or association until the issuer comes into compliance with the recovery policy of the rule. A previously delisted issuer could find it difficult to successfully complete a new listing of its securities if the issuer were to wait too long to attempt to comply with the recovery policy and compliance as to applicable prior periods had become difficult, if not impossible.

Interaction with Sarbanes-Oxley Act Section 304.  Proposed Rule 10D-1 is not intended to alter or otherwise affect the application of Section 304 of the Sarbanes-Oxley Act of 2002, as amended (Section 304), or any determination by the SEC or a court of when reimbursement of bonus, incentive-based or equity-based compensation paid to the chief executive officer or chief financial officer of an issuer is required under Section 304 following a restatement of financial statements occurring within 12 months after the issuance of the financial statements that are restated. The SEC appears to believe no double recovery would be possible as a result of both the application of Section 304 and a recovery pursuant to a Policy.10

Proposed Disclosure Requirements

Disclosure deadlines. The required disclosures discussed below would be required in SEC filings made on or after the effective date of the New Listing Standards applicable to an issuer.

Excess Compensation recovery disclosure. Annual reports on Form 10-K, proxy statements and information statements filed under the Exchange Act that require disclosure under Item 402 of Regulation S-K would have to include the disclosure required by Proposed Item 402(w) if at any time during the issuer's last completed fiscal year (1) a Restatement that required recovery of Excess Compensation pursuant to the issuer's Policy was completed or (2) an unrecovered balance of Excess Compensation was outstanding after the application of the issuer's Policy in connection with a prior Restatement. That disclosure would include for each such Restatement:

  • the date the issuer was required to prepare the Restatement;
  • the aggregate dollar amount of Excess Compensation attributable to the Restatement;
  • any estimates that were used in determining the Excess Compensation attributable to the Restatement if the financial reporting measure determining the right to payment of, or the amount of, the incentive-based compensation related to a stock price or TSR metric;
  • the aggregate amount of unrecovered Excess Compensation outstanding at the end of the issuer's last completed fiscal year; and
  • if the aggregate amount of Excess Compensation has not been determined, the fact that no determination has been made and the reason a determination has not been made.

In addition, issuers would be required to disclose:

  • if during the last completed fiscal year the issuer decided not to pursue recovery from any individual from whom recovery could be sought under the issuer's Policy, the name of each such individual and the amount forgone and a brief description of the reason the issuer decided in each case not to pursue recovery; and
  • the name of each individual from whom, as of the end of the last completed fiscal year, Excess Compensation had been outstanding for 180 days or longer since the date the amount of the Excess Compensation originally owed was determined and the amount of the Excess Compensation due from each such individual.

The information disclosed under Proposed Item 402(w) would not be incorporated by reference into any Securities Act registration statement except to the extent an issuer specifically incorporates by reference that information in a Securities Act registration statement. As a result, issuers not wanting to include in their Securities Act registration statements any Item 402(w) disclosure included in their annual reports on Form 10-K, proxy statements or information statements should take care with respect to how they incorporate by reference information in those filings into their Securities Act registration statements.

Summary compensation table disclosure. A Listed Issuer, including one that is a smaller reporting company, would be required to reduce the applicable reported compensation of a named executive officer in the summary compensation table for the fiscal year in which recovered Excess Compensation was initially reported as compensation by the amounts of the Excess Compensation recovered from such officer pursuant to its Policy and identify such recovered Excess Compensation amounts by footnote.11 Unlike the disclosures that would be required by Proposed Item 402(w), this disclosure would be required in any filing that requires the inclusion of a summary compensation table that includes compensation information for the affected fiscal year, including Securities Act registration statements.

Exhibit filing requirements. Listed Issuers would be required to file a copy of their Policy as an exhibit to their Annual Report on Form 10-K. Moreover, Listed Issuers would be required to file a copy of the disclosure required by Proposed Item 402(w) in XBRL format as an exhibit to their definitive proxy and information statements and annual reports on Form 10-K containing such disclosure. The information in that exhibit would have to be block-text tagged.

Other disclosure requirements. A Listed Issuer that complies with its Item 402(w) disclosure requirements would not need to disclose any incentive-based compensation recovery as a related person transaction pursuant to Item 404(a).

In addition, Schedule 14A and Form N-CSR (for certain investment companies) and Forms 20-F and 40-F (for foreign private issuers) would be amended to provide for disclosure by such issuers similar to that required by Proposed Item 402(w), including the exhibit and XBRL requirements.

Practical Considerations

The Proposals could create significant issues for Listed Issuers, not the least of which may be increased compensation expense as members of their managements contemplate the possible effect of the Proposals on their incentive-based compensation. The following discussion addresses certain practical concerns with the Proposals. 

  • "No-fault" recovery. Proposed Rule 10D-1, the New Listing Standards and the Policies that Listed Issuers would have to adopt and comply with would be "no-fault" in nature. As a result, the occurrence of a Restatement adversely affecting a Listed Issuer's performance under the performance measures on which the Listed Issuer's incentive-based compensation for the pertinent periods is based would result in the recovery of Excess Compensation, no matter the cause of, or how inadvertent, the error that led to the Restatement. In this no-fault environment and in view of the breadth of the definition of "executive officer," the recovery of Excess Compensation under a Policy could result in recovery from individuals that had no responsibility for the accounting errors that resulted in the Restatement triggering recovery and that had no involvement in the preparation of, or influence over, the restated financial statements. Although this result may appear to be inequitable, proponents of the Proposals can assert with some justification that the individuals from whom recovery is made would have never received the Excess Consideration if the error in the financial statements that are restated had never occurred. 

    As a result, the adoption of Proposed Rule 10D-1 and the New Listing Standards would make many, if not most, incentive-based compensation awards more uncertain, which could, in turn, adversely affect the executive compensation programs of Listed Issuers and, if history repeats itself, once again drive up their compensation expense.12 Listed Issuers would likely need to address the concerns of members of their management with the potential effect of Proposed Rule 10D-1 and the New Listing Standards on those individuals' compensation and their ability to plan their financial affairs. If Rule 10D-1 is substantially similar to Proposed Rule 10D-1, Listed Issuers may want to consider modifying the performance measures in their incentive-based compensation plans and incentive-based compensation awards for their less senior executive officers to avoid the perceived inequities of Rule 10D-1.13
  • Uncertainty of recovery of incentive-based compensation based on stock price or TSR. Making incentive-based compensation awarded, granted or vesting based on the Listed Issuer's stock price or TSR subject to recovery under the issuer's Policy carries significant risk that any recovery would be unfair to the individuals from whom the recovery is made or to the issuer's shareholders. Determining the precise effect of any Restatement on the restating issuer's stock price and TSR (particularly when the Restatement occurs early in the performance period over which the TSR is calculated) can be an uncertain process at best, even when using reasonable estimates to calculate the effect of the Restatement on the stock price or TSR. As a result, determinations of whether Excess Compensation was received by anyone and the amount of any Excess Compensation received in such cases may be problematic for issuers or unfair to the individuals who are deemed to have received Excess Compensation or the issuer's shareholders.

    Moreover, the methodology used to determine the effect of a Restatement on an issuer's stock price or TSR and the reasonableness of estimates used to determine if or how much Excess Compensation was received by individuals may be questioned by activist shareholders and proxy advisory firms. In addition, directors could be subject to derivative actions relating to the acceptability of the methodology used to determine the effect of a Restatement on an issuer's stock price or TSR or the reasonableness of estimates used in such determinations.
  • Proposed Rule 10D-1 would not compel, and the New Listing Standards would not require, executive officers to disgorge Excess Compensation. As a consequence, to ensure that they would be able to recover Excess Compensation from their executive officers and former executive officers pursuant to any application of the Policy, Listed Issuers should begin reviewing their internal policies, the terms of the plans under which they award incentive-based compensation, the agreements used to evidence and govern awards under those plans and any other agreements they have with individuals who are, have been or might become executive officers to make certain that once Rule 10D-1 becomes effective, the Listed Issuers have the legal right and ability to recover the Excess Compensation, including from individuals who are no longer employed by the Listed Issuer. Listed Issuers without such right and ability should consider adopting amendments to such policies, incentive compensation plans, award agreements or other agreements or obtaining other agreements from their executive officers and other relevant individuals in order to allow for required recoveries. As noted above, the final rules and amendments to disclosure requirements under Section 954 may differ from the Proposals and the New Listing Standards would reflect those differences as well as any additional provisions the exchanges and associations add to those New Listing Standards consistent with SEC's final rules. As a result, issuers may wish to make any changes to existing plans or agreements or adopt new agreements in response to the Proposals only after the SEC adopts its final rules and the proposed New Listing Standards are submitted to the SEC for approval.
  • Policies would trump existing executive compensation plans and agreements. As a result, Listed Issuers should begin to review their incentive-based compensation plans and agreements to determine if they should revise those plans or agreements to include new performance measures or other provisions to avoid or limit unfair recoveries from individuals under Rule 10D-1 and the New Listing Standards as adopted.

Footnotes

1 See Listing Standards for Recovery of Erroneously Awarded Compensation, Securities Act Release 33-9861; Exchange Act Release No. 34-75342, 80 Fed. Reg. 41144 (July 14, 2015), available at http://www.gpo.gov/fdsys/pkg/FR-2015-07-14/pdf/2015-16613.pdf (Release).

2 National securities exchanges and associations would have to file their proposed New Listing Standards with the SEC within 90 days after the SEC's final rules are published in the Federal Register. The New Listing Standards would have to be approved by the SEC and become effective no later than one year after that publication date. Under the Proposals, listed issuers subject to Rule 10D-1 would have 60 days after the effective date of the New Listing Standards applicable to them to adopt their Policies. In the last instance of the SEC's adoption of a rule implementing a mandate of the Dodd-Frank Wall Street Reform and Consumer Protection Act requiring exchanges to adopt new listing standards (which related to, among other matters, compensation committees), almost two years elapsed between the SEC's publication of the proposed rule and its approval of the exchanges' new listing standards, which approval resulted, in the case of the New York Stock Exchange's version of such new listing standards, only after that exchange made several amendments to its proposed new listing standards.

3 As a result of individuals having to repay Excess Compensation in after-tax dollars, unless an individual from whom Excess Compensation is recovered can obtain a refund of the taxes paid on the Excess Compensation, such individual's compensation will be less than the amount of incentive-based compensation the individual would have received had the Excess Compensation not been originally paid.

4The Release makes clear that such home country laws are only laws of foreign countries and do not include state corporate or other laws that would prohibit Listed Issuers organized in the U.S. from recovering Excess Compensation pursuant to a Policy. Documentation relating to a claim of impracticability due to a violation of home country law would have to include a legal opinion of home country counsel that the recovery would result in such a violation. That opinion must be submitted to, and must not be unacceptable to, the exchange or association.

5 Item 4.02(a) of Form 8-K requires disclosure if an issuer's board of directors, a committee of the board or the officer or officers of the issuer authorized to take such action if board action is not required, concludes that any previously issued financial statements, covering one or more years or interim periods for which the issuer is required to provide financial statements under Regulation S-X should no longer be relied upon because of an error in such financial statements as addressed in the Financial Accounting Standards Board's Accounting Standards Codification Topic 250, Accounting Changes and Error Corrections.

6 In the Release, the SEC notes that, although "financial information required to be reported under the securities laws" might be interpreted to apply only to accounting-based metrics, the SEC believes that such information encompasses performance measures such as stock price and TSR affected by accounting-related information and subject to the SEC's disclosure requirements. See Release at 41155. This view looks suspiciously like an expedient of the SEC in light of the fact that numerous issuers link the payment and amount of incentive-based compensation in their executive compensation packages to TSR, a metric based primarily on the change over time in the issuer's stock price.

7 In the Release, the SEC notes there are a number of methods with different levels of complexity of the estimations and their related costs. See Release at 41160.

8 If the options or SARs received as incentive-based compensation have been exercised and the shares received upon exercise have not been sold, the issuer would have to recover that portion of the shares received upon exercise of the options or SARs constituting Excess Compensation. Otherwise, the issuer would have to recover the cash proceeds of those excess shares.

9 An "executive officer" would be an issuer's president, principal financial officer, principal accounting officer (of if there is not a principal accounting officer, the controller), any vice president in charge of a principal business unit, division or function (such as sales, administration or finance), any other officer or other person who performs a policy-making function for the issuer. Executive officers of an issuer's parent or subsidiary would be deemed executive officers of the issuer if they perform policy-making functions for the issuer. "Policy-making function" would not include policy-making functions that are not significant. Neither Proposed Rule 10D-1 nor the Release provides any guidance as to which policy-making functions are significant for purposes of Proposed Rule 10D-1 or as to an applicable test of significance. Proposed Rule 10D-1 would apply to recovery of Excess Compensation from individuals. Use of the word "person," which as defined under the Securities Act and Exchange Act includes entities in addition to individuals, in the definition of "executive officer" is presumably an oversight.

10 See Release at 41160.

11 The SEC appears to have assumed for purposes of the Proposals that issuers do not adopt performance periods for incentive-based compensation awards exceeding three fiscal years. If a performance period for an incentive-based compensation award exceeds three years, a summary compensation table included in a Listed Issuer's proxy statement used to solicit proxies following the issuer's recovery of Excess Compensation relating to that award might not include the compensation information that would reflect such recovery.

12 See SEC Commissioner Michael S. Piwowar, Statement at Open Meeting on Clawbacks of Erroneously Awarded Compensation (July 1, 2015), available at http://www.sec.gov/news/statement/statement-at-open-meeting-on-clawbacks-of-erroneously-awarded-co.html.

13 See SEC Commissioner Daniel M. Gallagher, Dissenting Statement at an Open Meeting to Propose Compensation Clawback Listing Standards (July 1, 2015), available at http://www.sec.gov/news/statement/dissenting-statement-compensation-clawback-listing-standards.html, for Commissioner Gallagher's discussion of problems he believes inherent in the Proposals, including the problem he sees with the definition of "executive officer."

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You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions