The Advisors' Blog

As I blogged last week on TheCorporateCounsel.net, just in time for our “Proxy Disclosure & Executive Compensation Conferences” – where our agenda includes a panel covering “clawbacks” issues – the SEC issued this Sunshine Notice about an open meeting tomorrow. The purpose of the meeting is to consider whether to re-open the comment period for the clawback proposal that the Commission issued back in 2015, which would – at a very high level – direct the stock exchanges to require listed companies to implement policies to recover incentive-based pay in the event of an accounting restatement.

This doesn’t come as a huge surprise, because consideration of a re-proposal has been an item on the SEC’s “Reg Flex Agenda” for the past two years. Consistent with the priorities that he identified in that Agenda, SEC Chair Gary Gensler also has been remarking at recent conferences, such as the CII Fall Conference, that he wants to knock out remaining Dodd-Frank rulemaking in short order.

The clawback proposal was criticized at the time because it would be triggered only be formal restatements, which have been on the decline. And in the years since, some people think it’s become even more antiquated. But although a clawback sounds simple on its face, it is very complex in practice. That’s why most of the big “clawbacks” that we’ve seen in the past few years are actually forfeitures of future incentives that have not yet been paid. So, it will be interesting to see whether the comment period is reopened and – if so – what comments roll in.

If & when clawback rules are finalized, that would satisfy the requirement in Section 954 of the Dodd-Frank Act. A couple weeks ago, the SEC proposed “say-on-pay” voting disclosure requirements that would take care of the rulemaking mandates under Section 951 of that Act. As I blogged about a year ago, the list of outstanding Dodd-Frank rulemaking requirements rightfully continues to shrink.

– Liz Dunshee