The Advisors' Blog

In a recent “Deep Quarry” newsletter, Olga Usvyatsky shares some recent trends in clawback-related disclosures. She notes that only two of the about 250 companies that “checked the box” in 2024 actually sought to clawback excess compensation following a restatement. She surveyed a sample of about 30 recovery analysis disclosures and found four broad justifications companies cited for why no recoupment was necessary. Those are:

– The restatement did not affect the performance metrics used for compensation purposes (about 53% of the sample).

– No performance-based compensation was awarded during the applicable restatement period (about 13% of the sample).

– The restatement affected the performance metrics but did not affect the payouts (about 17% of the sample).

– A general statement that no recovery is required (about 17% of the sample).

The newsletter goes into greater detail on the last two cited reasons, which I’ve summarized below:

– Of the companies that noted that the restatement impacted the metrics but not payouts, she notes that three companies considered the impact of the restatement on TSR (all were “little r” restatements). Then she shares disclosure from one such company that determined that PSUs were still appropriately paid out at 200% based on relative TSR due to the company’s high level of financial performance even as restated.

– With respect to general statements that no recovery was required, Olga notes that numerous Corp Fin comment letters asked companies to elaborate on why no recovery was necessary.

– Meredith Ervine