On September 11, 2011, The New York Times
Without Claws," by Gretchen Morgenson. The article meant to highlight a
lackluster enforcement record by the Securities and Exchange Commission (SEC)
on executive pay "clawbacks". Under limited circumstances, the SEC can step in
and force CEOs and CFOs to repay unearned bonuses and incentives - something
those executives are supposed to do voluntarily if it turns out they were paid
erroneously because of an accounting error or accounting manipulation.
Section 304 of the Sarbanes-Oxley Act of 2002, which
covers clawbacks, is, on its face, a strict liability provision but the SEC has
been exercising "prosecutorial discretion" when applying the statute.
The Dodd-Frank Act will expand the population of those
potentially liable for clawbacks and the time period used to calculate the
paybacks. The new law also drops the prerequisite under Sarbanes-Oxley that
there has to be misconduct before paybacks are expected.
I covered this, and other provisions of Dodd-Frank that
expand, retract, or revise Sarbanes-Oxley statutes, in a
recent OpEd at Boston Review.
Read this article in its entirety at the re: The Auditors, a blog
by Francine McKenna. For more information
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