The Advisors' Blog

When the new clawback listing standards came out, there was a lot of discussion about how companies would go about the necessary calculations for stock price or TSR-based awards. While event studies were identified as the likely standard, advisors were recommending that the clawback policy not identify the calculation methodology in advance and instead allow the compensation committee to select a methodology based on the facts and circumstances.

This recent WTW memo, 4 Steps for Executing Clawbacks After Your Restatement, agrees — noting “not all stock plans or total shareholder return-based plans will require an event study for every restatement.” If you’re wondering how a compensation committee would go about making the decision of whether to commission an event study, a helpful table addresses several factors that will influence whether one is needed. The listed factors include inflection points in the comp plan, the quantum of stock price movement, market volatility, percentage of pay impacted and the magnitude & cause of the restatement.

For more on the complexities of implementing a clawback, tune in for our upcoming webcast “Clawbacks: Navigating the Process After a Restatement” on Wednesday, April 17, at 2 pm Eastern to hear from two of the authors of the memo, Steve Seelig & Rich Luss, who will be joined by Gibson Dunn’s Ron Mueller and Latham’s Maj Vaseghi. They’ll discuss how to run a thoughtful, thorough and organized process if you find yourself in mandatory clawback territory.

– Meredith Ervine