compensation, Uncategorized

SEC Releases proposed compensation clawback rules

The Securities and Exchange Commission is considering new rules and regulations for compensation claw back policies. If the proposal is adopted, it will implement specific requirements from the Dodd-Frank Wall Street Reform and Consumer Protection Act, where companies listed with national securities exchanges and associations will have to develop and implement clawback policies.

In general, all listed companies must maintain a written claw back policy for the recoupment of certain compensation awarded to executive officers. Some of the specific terms of the executive summary include:

  • The claw back policy is triggered when an accounting restatement corrects a material error in a previous financial statement
  • The policy applies to incentive-based compensation granted within the preceding three years of the accounting restatement
  • Fault or lack thereof is irrelevant to the implementation of the clause

Under the proposal, the claw back clause must contain the following elements:

  • Description of the specific type of restatement that triggers the claw back clause;
  • Definition of what “incentive-based compensation” is subject to recovery under the claw back clause;
  • Statement of the specific time period covered in relation to when the compensation was received by the executive officer;
  • Explanation regarding who is covered under the clause;
  • Explanation about the amount of recovery authorized under the clause; and
  • Statement that recoupment is mandatory unless it is “impracticable.” meaning that the cost of recovering exceeds the total amount of recovered compensation.

For questions about this proposed regulation and possible implications for your company, contact our office to speak with an attorney.

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Uncategorized

Severance Agreements and Releases: A Breakdown

You never walk into your dream executive job thinking about an exit strategy. But there is a distinct possibility that you may be asked to leave your company for any number of reasons. Rather than being blindsided by this, you can agree to a severance package with your employment.

Why would a company agree to a severance arrangement? They can prevent expensive litigation between employers and terminated employees. The agreement itself is just a contract between an employer and employee waiving certain legal rights of the employee in exchange for additional compensation or other benefits provided by the employer. On one hand, for the employee, the positive side of severance benefits may include large one-time payments, continued health benefits, additional salary payments, letters of recommendation or other offers.

On the other hand, severance packages may also include critical non-compete and confidentiality agreements, as well as releases requiring the employee to give up any claims she may have forever. Before signing such an agreement, be knowledgeable of the effects those provisions may have on your future ability to obtain employment.

If you’ve been offered severance in exchange for a release, contact us today.

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