Excess-Pay Clawbacks

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

31 Pages Posted: 5 Jul 2011 Last revised: 14 Oct 2015

See all articles by Jesse M. Fried

Jesse M. Fried

Harvard Law School; European Corporate Governance Institute (ECGI)

Nitzan Shilon

Peking University School of Transnational Law; Israel Securities Authority

Date Written: March 28, 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.

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

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: https://ssrn.com/abstract=1798185

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 )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Nitzan Shilon

Peking University School of Transnational Law ( email )

University Town,
Xili, Nanshan District
Shenzhen, Guangdong 518055

Israel Securities Authority ( email )

22 Kanfei Nesharim Street
Jerusalem 95464

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