Liz recently blogged that the SEC designated a longer period for taking action on proposed listing standards to implement Dodd-Frank clawback rules. This left companies who haven’t yet adopted a compliant policy unsure whether to jump on this now using the listing rules proposed in February or whether some additional time may be forthcoming. A recent FW Cook blog clarifies that clawbacks should be on your summer to-do list. Here’s an excerpt:
An April 24, 2023 SEC release, while somewhat ambiguous, could be read to suggest that the SEC would not take action before June 11, 2023, although leaving open the possibility of a later approval date.
Recent conversations between SEC staff and executive compensation practitioners suggest that the SEC is leaning toward treating June 11, 2023 as the date for final action (actually, June 9 since June 11 is a Sunday). While practitioners have strongly lobbied for the SEC to delay action until the absolute deadline of November 28, 2023, the SEC so far appears unpersuaded, at least in part because of procedural reasons referenced in the April 24, 2023 release.
Given the substantial chance the SEC will approve the listing standards no later than June 9, 2023, this means a new policy would have to be in place by August 8, 2023 (i.e., 60 days later). Even though drafting a compliant policy may be relatively straightforward, seeking Board/committee review and approval over the summer could be challenging from a practical perspective. There are many boards and committees that don’t meet in the June/August period, so waiting until the SEC has acted may result in the need for special unanticipated actions, either through special meetings or possibly unanimous written consents.
Dust off your flip flops and your employment agreements, equity plans, deferred compensation plans and existing clawback policies since, as Morgan Lewis describes in a recent alert, there’s a lot to consider. The good news is that we have more resources, including multiple models of a Dodd-Frank-compliant policy, in our “Clawbacks” Practice Area. Plus, we’ve extended our June 27th webcast “Proxy Season Post-Mortem: The Latest Compensation Disclosures” by an additional 30 minutes to bring you the latest on clawback policies from our expert panel: Mark Borges, Principal at Compensia and Editor of CompensationStandards.com; Dave Lynn, Partner at Morrison Foerster and Senior Editor of TheCorporateCounsel.net and CompensationStandards.com; and Ron Mueller, Partner at Gibson Dunn & Crutcher LLP.
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– Meredith Ervine, DealLawyers.com, May 8, 2023