Clawback Provisions in Executive Compensation Contracts

23 Pages Posted: 22 May 2020

See all articles by Johanna Stark

Johanna Stark

Max Planck Institute for Tax Law and Public Finance

Date Written: May 22, 2020

Abstract

Clawbacks are contractual provisions in executive compensation contracts that allow for an ex post recoupment of variable pay if certain triggering conditions are met. As a result of regulatory responses to financial crises and corporate scandals as well as of growing shareholder pressure to implement effective measures against executive misbehaviour, the prevalence of such clauses has risen considerably in the recent past, beginning in the US after the 2000 financial crisis. As clawbacks have become a buzzword in the European debate about ensuring good corporate governance also beyond the financial sector, it is time to critically discuss the hopes that have been associated with various types of such provisions.

Keywords: corporate governance, clawback, executive compensation, bonuses, stock options, managerial power, Sarbanes Oxley, Dodd Frank

JEL Classification: G32, G34, G38, J33, J44, K12, K22, M12, M52

Suggested Citation

Stark, Johanna, Clawback Provisions in Executive Compensation Contracts (May 22, 2020). Working Paper of the Max Planck Institute for Tax Law and Public Finance No. 2020-06, Available at SSRN: https://ssrn.com/abstract=3607786

Johanna Stark (Contact Author)

Max Planck Institute for Tax Law and Public Finance ( email )

Marstallplatz 1
Munich, 80539
Germany

HOME PAGE: http://www.tax.mpg.de/en/business_and_tax_law/business_and_tax_taw_people/dr_johanna_stark.html

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