The Advisors' Blog

Bloomberg recently reported on research from Nonlinear Analytics assessing 205 companies that checked the first Form 10-K checkbox noting correction of an error. They found that only 15% (29 companies) said they reviewed the error to see if they needed to enforce a clawback (by checking the second box denoting that a recovery analysis was required).

The article quotes Latham’s Maj Vaseghi (a frequent contributor to our events!) reminding readers that accounting errors discovered in early 2024 may not have triggered a clawback since 2023 bonuses were not yet paid and the listing rules were not effective until late 2023. But SEC Staff has suggested that the circumstances in which the first box should be checked but not the second are very limited. Nonetheless, there seems to be continued confusion about when to check the second box (and inconsistent practices). 

Perhaps most importantly, the article identifies two companies that reported that they were required to recoup compensation from executives:

– NCR Voyix Corp. See page 33 of the 10-K and pages 36, 41 and 49 of the proxy.

– Katapult Holdings Inc. (emerging growth company). See pages 35 to 36 of the proxy.

Here’s a snippet from the NCR Voyix proxy statement:

As disclosed above the Company revised its financial statements for interim periods in 2023 as reported in our 2023 Form 10-K. In March 2024 the Compensation Committee determined that, based on the revisions, the achievement of 2023 AIP and the adjustment of the 2021 PBRSUs and 2022 PBRSUs was impacted. Under the Company’s clawback policy, in April 2024, the Company recovered a portion of the 2023 bonus payouts paid to certain Departed Executives in December 2023 as well as a portion of the adjusted restricted stock units that were issued in December 2023 in connection with the performance-related adjustments for the 2021 PBRSUs and 2022 PBRSUs.

No amounts were recovered from the bonus payments made to current executives. Their bonuses were not impacted by the restatement because the Committee previously exercised its negative discretion to reduce their bonus levels below what they would have received after the revised financial statements. In addition, as discussed below, Mr. Oliver’s annual incentive payout also was not subject to recovery because he did not receive any 2023 AIP payout from the Company as he was appointed the Chief Executive Officer of NCR Atleos in connection with the Spin-Off. The amounts recovered in April 2024 satisfied the entirety of the Company’s clawback obligations under its clawback policy. See the 2023 Annual Incentive Plan and 2023 Long Term Incentive Program sections above for further analysis of how the clawback amounts were calculated and executed the impacted executives.

The disclosure then includes a chart with the following: (i) the date of the restatement; (ii) the aggregate dollar amount of erroneously awarded incentive-based compensation attributable to the accounting restatement; and (iii) the aggregate amount of the incentive-based compensation erroneously awarded and that remains outstanding at the end of the last completed fiscal year; and (iv) the outstanding amounts from any current or former named executive officer for more 180 days or more.

– Meredith Ervine