Clawbacks Take Center Stage

American Express is one of a rapidly growing number of large companies, including Time Warner, Intel and Comcast, to adopt clawback policies.

While the Sarbanes-Oxley Act includes a compensation forfeiture provision, known as Section 304, it is limited to the CEO and CFO and requires the Securities and Exchange Commission to enforce it.

The SEC's new compensation disclosure regulations require the discussion of compensation recovery policies in the recently adopted Compensation Discussion and Analysis (CD&A) section. The policies provide a way for companies to retireve some portion of large bonuses or salaries paid out to executives under what is later to be discovered as dubious circumstances.

Shareholders are pushing boards to implement their own clawback policies, which often cover employees besides the CEO and CFO, and to then enforce them themselves.

Compensation experts say new pay disclosure rules, which explicitly ask boards to reveal whether or not such a program is in place, along with UnitedHealth Group's landmark clawback of roughly $900 million in pay from former executives involved in the company's option backdating scandal, are bound to further accelerate adoption of clawbacks by companies.