The Advisors' Blog

– Paul Hodgson, The Corporate Library

Below is something I blogged recently on The Corporate Library’s Blog:

While the growth of clawback provisions, according to our latest research, continues, there is no sign of any company willingness actually to implement such provisions. This leaves it to lawsuits such as that at Goldman Sachs, and the SEC’s action against Bank of America regarding the Merrill Lynch bonuses, to prosecute companies, rather than executives. It is clear that making companies pay for mistakes eventually makes shareholders pay for the mistakes they have had to suffer rather than be responsible for.

That is the glory of the clawback, it takes money back from executives who have earned it fraudulently either because of sins of commission or sins of omission. That money goes back to the company and eventually back to shareholders. It holds the individuals responsible for fraudulent actions or ensures that they do not profit from such actions whether responsible or not.

So what the heck? Surely this was all someone’s fault for starters? Or if it wasn’t someone’s fault – which I find impossible to believe – certain individuals have profited enormously from inflated earnings and revenues that were based on chimera.

Ah, well, you see, these clawback provision johnnies, they’re awfully new, you know, and we never had them when all this bad stuff was going on.

Yeah. Clawbacks are new. But morality and business ethics go back a ways.

A data set of all the companies with a clawback provision is also available alongside the research, so you can see exactly whose feet you can hold to the fire when it comes to payback time… in the future.