Wither Clawbacks? or, How Sacred is Exec Comp? |
Clawbacks hit the news recently, as J.P. Morgan Chase seeks to recover compensation paid to executives responsible for their recent derivates debacle.
We wish we wrote this outstanding precis of the subject, by law professor Rob Brown at the University of Denver. He makes these interesting points:
- Clawbacks represent a singular opportunity for the BoD to challenge executives, and actually entails the proper exercise of fiduciary duty.
- Directors have failed miserably to exercise this duty, and state law and regulation has also failed to compel them to do so.
- Federal authorities have intervened, through Sarbanes-Oxley and Dodd-Frank, to force the issue.
Our takeaway? We've heard corporate defenders crow that investors should leave governance to directors and executives. Yet, weak or non-existent clawback policies and practices shows succinctly that directors remain afraid to challenge executives on the most important subjects, like executive compensation.
Professor Brown writes and supervises the always-salient (if at times legalistic) Race to the Bottom blog, worth including on your RSS feed.
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