Clawback
Also called clawback policy, compensation recovery, clawback provisions.
A policy or rule that lets a company recover incentive pay after a restatement or misconduct. Clawbacks change later realized or recovered amounts; they do not rewrite the original SCT Total as filed.
What it is
A clawback is a policy or contract right to recover incentive pay after the fact—typically following a restatement, or sometimes after misconduct, even without a restatement. Exchange Act Rule 10D-1 and listing standards now require listed companies to recoup certain incentive-based compensation from current and former executive officers if a restatement would have reduced the payout, on a no-fault basis for that recovery.
Clawbacks can change amounts after the SCT is filed. CompensationBase keeps the original SCT Total as filed and does not apply later recoveries. A recovered bonus will not rewrite last year’s ranking.
Why companies use it
Listing rules require a restatement clawback policy. Broader “misconduct” clawbacks are company-designed and used to tell shareholders the committee can reach pay after a scandal.
The idea is to make incentive metrics less attractive to manipulate and to return pay that was never “earned” under restated numbers.
Pros
- Required restatement recovery is now standardized at listed companies.
- Can return cash and cancel unvested equity.
- Signals that SCT figures are not always the last word economically.
Cons
- Practical recovery from taxes-already-paid cash is messy.
- The mandatory rule is narrower than press usage of “clawback.”
- Historical SCT Totals on this site will not shrink when a clawback hits.
Examples
Restatement
EPS is restated downward; the annual bonus would have paid 80% instead of 120%. The policy recoups the difference from NEOs. Last year’s SCT still shows the original 120% payout in the catalog.
What we do not do
CompensationBase does not scrape 8-Ks about recoupment to amend rankings. The filing’s SCT Total remains the headline until that table itself is amended and re-ingested.
On CompensationBase
Clawbacks can change amounts after the table is filed. CompensationBase keeps the original SCT Total as filed and does not apply later recoveries.
Related terms
- Non-equity incentive plan compensation
Cash paid under a pre-established bonus or incentive plan, reported in the SCT Non-Equity Incentive Plan Compensation column. Distinct from a discretionary Bonus.
- Reported pay vs realized pay
Reported pay is the SCT grant-date total for a fiscal year. Realized pay is cash received plus equity that actually vested or was exercised that year, which can be much higher or lower than the reported figure.
- Item 402
The SEC disclosure item that requires the Summary Compensation Table and related executive pay tables. CompensationBase is an Item 402 SCT reader, not a Form 4 or 8-K pay feed.