As Meredith noted last week, high-level DOJ folks recently announced a pilot program focused on corporate compensation and clawback policies. They’re part of sweeping policy changes at the Department that are aimed at encouraging voluntary disclosure of misconduct and holding the real “bad guys” accountable. Deputy AG Lisa Monaco previewed this policy in a big memo last fall. A recent Sidley memo highlights the new details that we’ve been waiting for:
1. Every corporate resolution involving the Criminal Division must include a requirement that the resolving company develop compliance-promoting criteria within its compensation and bonus system. Under this Program, resolving companies will need to revise their performance and bonus metrics to include compliance-related components. Companies might implement a system whereby executives and staff are required to forfeit their bonuses if they fail to meet certain compliance-related objectives.
2. The Criminal Division will provide fine reductions to companies who seek to claw back compensation from corporate wrongdoers. Notably, recognizing the reality of how difficult clawbacks can be, Monaco announced that companies that pursue clawbacks in good faith, but are unsuccessful, may still be eligible for a fine reduction.
We’re posting memos about the DOJ’s new program in our “Clawbacks” Practice Area and will be watching how it plays out in practice. The DOJ stance is something to keep in mind as you update your clawback policies in response to the new listing standards that will be finalized this year.
– Liz Dunshee, CompensationStandards.com, March 16, 2023