Issuers Implementing Clawback Policies and Plan Provisions

Section 954 of The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the SEC to create a rule requiring public companies to recover incentive-based executive compensation that was paid out based on inaccurate financial statements.  These "clawback" or recoupment provisions are more stringent than under Section 304 of the Sarbanes-Oxley Act of 2002, which extends only to the CEO and CFO and which requires misconduct on the part of the executives or other employees rather than financial restatement due to erroneous data or material noncompliance.

Some companies or their respective board compensation committees have signaled their intent to implement a clawback policy or to modify existing compensation recoupment provisions following the SEC’s final rulemaking (see DEF14A proxy filings on February 2 by Analog Devices, Inc. and Ciena Corp.)  Others are forging ahead. 

GameStop Corp. filed a Form 8-K on February 8 reporting a new Clawback Policy under Item 8 (Other Events).  The policy provides for reimbursement of annual incentive payments or long-term incentive payments to a current or former executive officer of the Company where the payment was based on inaccurate financials over a three-year look-back period. 

DGT Holdings Corp. filed an amended and restated 2007 Incentive Stock Plan with its DEF14A filed on January 26, seeking to increase the number of shares under the plan.  Certain changes to the plan approved by the board will be effective upon shareholder approval of the plan proposal, including a clawback provision that was added to reflect Dodd-Frank legislation. The new Clawback provision is Section 18 of the amended and restated plan. 

Central Pacific Financial Corp. issued preferred shares and a ten-year warrant to the U.S. Treasury in 2009 under the Troubled Asset Relief Program Capital Purchase Program.  In the Compensation Disclosure & Analysis section of the PRE14A filed on February 3, Central Pacific notes that although it does not have a separate policy regarding clawback of incentive awards in the event of misstated or restated financials results, the company's participation in the Capital Purchase Program requires it to ensure that any executive incentive compensation plan does include such a provision for inaccurate financial statements or incentive criteria.