Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Sunday, July 10, 2011

Fried & Shilon on Excess-Pay Clawbacks

Excess-Pay Clawbacks, by Jesse M. Fried, Harvard Law School, and Nitzan Shilon, Harvard Law School, was recently posted on SSRN.  Here is the abstract:

We explain why firms should have a policy requiring directors to recover “excess pay” – payouts to executives resulting from an error in compensation metrics (such as inflated earnings). We then analyze the clawback policies voluntarily adopted by S&P 500 firms as of 2010 and find that only a small fraction had such a policy. Our findings suggest that the Dodd-Frank Act, which requires firms to adopt a clawback policy for certain types of excess pay, will improve compensation arrangements at most firms. We also suggest how the types of excess pay not reached by Dodd-Frank should be addressed.

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