Excess Pay and the Dodd-Frank Clawback

Director Notes, No. DN-V3N20, pp. 1-8, October 2011

9 Pages Posted: 3 Nov 2011  

Jesse M. Fried

Harvard Law School; European Corporate Governance Institute (ECGI)

Nitzan Shilon

Peking University School of Transnational Law; Israel Securities Authority

Date Written: October 2, 2011

Abstract

[This article is a revised and condensed version of Jesse Fried and Nitzan Shilon, Excess-Pay Clawbacks, available at http://ssrn.com/abstract=1798185]

The Dodd-Frank Act requires firms to adopt clawback policies for recovering certain types of excess pay — overpayments resulting from errors in performance measures (such as reported earnings). We discuss the costs of excess pay to investors, explain why most firms’ existing arrangements fall far short of what the Dodd-Frank Act is likely to require, and offer guidance to boards seeking to eliminate the types of excess pay not reached by Dodd-Frank.

Keywords: Dodd-Frank, clawback, executive compensation, bonuses, stock options, restricted stock, Sarbanes-Oxley

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

Suggested Citation

Fried, Jesse M. and Shilon, Nitzan, Excess Pay and the Dodd-Frank Clawback (October 2, 2011). Director Notes, No. DN-V3N20, pp. 1-8, October 2011. Available at SSRN: https://ssrn.com/abstract=1953317

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 ECARES ULB CP 114
B-1050 Brussels
Belgium

Nitzan Shilon

Peking University School of Transnational Law ( email )

University Town,
Xili, Nanshan District
Shenzhen, Guangdong 518055
China

Israel Securities Authority ( email )

22 Kanfei Nesharim Street
Jerusalem 95464
Israel

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