The Advisors' Blog

This blog features wisdom from respected compensation consultants and lawyers

June 8, 2023

Dodd-Frank Clawbacks: Exchanges Extend Effective Date!

As Liz blogged yesterday and today on TheCorporateCounsel.net, NYSE and Nasdaq have now filed amendments to their proposed listing standards, which set an October 2nd effective date. If the amendments are approved by the SEC as proposed, companies will have until Friday, December 1st to adopt a compliant Dodd-Frank clawback policy covering incentive-based compensation received by executives on or after October 2, 2023.

In addition, the NYSE Amendment changes the proposal to allow for a cure period when the Exchange believes that a company has failed to enforce the policy. It still requires NYSE companies to provide notice to the Exchange if they haven’t adopted a compliant clawback policy before the compliance date (and the proposal continues to provide a cure period for late adoption scenarios). NYSE’s changes to the delisting procedures align with comments on the proposal and the Nasdaq approach to delisting for lack of clawback policy enforcement. This Wilson Sonsini blog provides color here:

Other than the change to the effective date, proposed Section 303A.14 of the NYSE Listed Company Manual is the same as proposed in the NYSE’s initial filing and as noted above, closely follow the requirements outlined in Rule 10D-1. Notably, this means that, similar to Nasdaq’s proposed listing standards, proposed Section 303A.14 does not include any guidance or factors that the NYSE will consider when making a determination as to whether the issuer has recovered “reasonably promptly” the amount of erroneously awarded incentive-based compensation.

However, the blog also highlights that in Amendment No. 1, the NYSE stated the following:

“The issuer’s obligation to recover erroneously awarded incentive based compensation reasonably promptly will be assessed on a holistic basis with respect to each such accounting restatement prepared by the issuer. In evaluating whether an issuer is recovering erroneously awarded incentive-based compensation reasonably promptly, the [NYSE] will consider whether the issuer is pursuing an appropriate balance of cost and speed in determining the appropriate means to seek recovery, and whether the issuer is securing recovery through means that are appropriate based on the particular facts and circumstances of each executive officer that owes a recoverable amount.”

We’ve posted several very helpful sample policies on this site. In our “Proxy Season Post-Mortem: The Latest Compensation Disclosures” webcast coming up on June 27th, Morrison Foerster’s Dave Lynn, Gibson Dunn’s Ron Mueller and Compensia’s Mark Borges will be sharing even more practical insights on how to finalize your policy. If you don’t already have access to CompensationStandards.com, email sales@ccrcorp.com to start a no-risk membership or sign up online.

– Meredith Ervine