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Excess-Pay Clawbacks

Jesse M. Fried

Harvard Law School; European Corporate Governance Institute (ECGI)

Nitzan Shilon

Harvard Law School; Peking University - School of Transnational Law

March 28, 2011

Journal of Corporation Law, Vol. 36, pp. 722-751, 2011

We explain why firms should have a policy requiring directors to recover “excess pay” – payouts to executives resulting from an error in compensation metrics (such as inflated earnings). We then analyze the clawback policies voluntarily adopted by S&P 500 firms as of 2010 and find that only a small fraction had such a policy. Our findings suggest that the Dodd-Frank Act, which requires firms to adopt a clawback policy for certain types of excess pay, will improve compensation arrangements at most firms. We also suggest how the types of excess pay not reached by Dodd-Frank should be addressed.

Number of Pages in PDF File: 31

Keywords: Dodd-Frank, Clawback, Executive Compensation, Bonuses, Stock Options, Restricted Stock, Manipulation, Managerial Power, Sarbanes Oxley

JEL Classification: G18, G28, G34, G38, J33, K22, M52

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Date posted: July 5, 2011 ; Last revised: August 1, 2011

Suggested Citation

Fried, Jesse M. and Shilon, Nitzan, Excess-Pay Clawbacks (March 28, 2011). Journal of Corporation Law, Vol. 36, pp. 722-751, 2011. Available at SSRN: http://ssrn.com/abstract=1798185

Contact Information

Jesse M. Fried (Contact Author)
Harvard Law School ( email )
1575 Massachusetts
Griswold Hall 506
Cambridge, MA 02138
United States
617-384-8158 (Phone)
HOME PAGE: http://www.law.harvard.edu/faculty/directory/10289/Fried
European Corporate Governance Institute (ECGI) ( email )
B-1050 Brussels
Nitzan Shilon
Harvard Law School ( email )
5163 Massachusetts Ave
Cambridge, MA 02138
United States
Peking University - School of Transnational Law ( email )
University Town,
Xili, Nanshan District
Shenzhen, Guangdong 518055

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