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If you’re at an NYSE-listed company and you’ve been panicking about fitting approval of a Dodd-Frank clawback policy into full compensation committee agendas this summer, we’ve got good news: the NYSE has filed an Amendment to its proposed listing standard, which sets an October 2nd effective date. If the Amendment is approved by the SEC as proposed, that means that NYSE companies will have until Friday, December 1st to adopt a compliant Dodd-Frank clawback policy and that the policy would cover incentive-based compensation received by executives on or after October 2, 2023.

Nasdaq hasn’t filed a corresponding amendment (yet) – we’ll see whether that happens before the end of this week when the original proposal is currently scheduled to go effective. The SEC also hasn’t posted the notice for the NYSE Amendment yet, which would clarify the process for this Amendment being approved.

This Wilson Sonsini blog highlights commentary from the Amendment to support this extended effective date – which is that the SEC’s adopting release for the Dodd-Frank clawback rules said:

…we note that issuers will have more than a year from the date the final rules are published in the Federal Register to prepare and adopt compliant recovery policies.

So, the Amendment recognizes that many folks had been expecting the compliance date to fall sometime after November 28, 2023, which would be the one-year anniversary of the rules being published in the Federal Register.

In addition, the NYSE Amendment changes the proposal to allow for a cure period when the Exchange believes that a company has failed to enforce the policy. It still requires NYSE companies to provide notice to the Exchange if they haven’t adopt a compliant clawback policy before the compliance date (and the proposal continues to provide a cure period for late adoption scenarios). NYSE’s changes to the delisting procedures align with comments on the proposal and the Nasdaq approach to delistings for lack of clawback policy enforcement. The Wilson Sonsini blog also provides color here:

Other than the change to the effective date, proposed Section 303A.14 of the NYSE Listed Company Manual is the same as proposed in the NYSE’s initial filing and as noted above, closely follow the requirements outlined in Rule 10D-1. Notably, this means that, similar to Nasdaq’s proposed listing standards, proposed Section 303A.14 does not include any guidance or factors that the NYSE will consider when making a determination as to whether the issuer has recovered “reasonably promptly” the amount of erroneously awarded incentive-based compensation.

However, the blog goes on to highlight that in Amendment No. 1, the NYSE stated the following:

“The issuer’s obligation to recover erroneously awarded incentive based compensation reasonably promptly will be assessed on a holistic basis with respect to each such accounting restatement prepared by the issuer. In evaluating whether an issuer is recovering erroneously awarded incentive-based compensation reasonably promptly, the [NYSE] will consider whether the issuer is pursuing an appropriate balance of cost and speed in determining the appropriate means to seek recovery, and whether the issuer is securing recovery through means that are appropriate based on the particular facts and circumstances of each executive officer that owes a recoverable amount.”

We’ve posted several very helpful sample policies on CompensationStandards.com, where we are covering all the ins & outs of clawbacks. In our “Proxy Season Post-Mortem: The Latest Compensation Disclosures” webcast coming up on June 27th on that site, Morrison Foerster’s Dave Lynn, Gibson Dunn’s Ron Mueller and Compensia’s Mark Borges will be sharing even more practical insights on how to finalize your policy. If you don’t already have access to CompensationStandards.com, email sales@ccrcorp.com to start a no-risk membership or sign up online.

– Liz Dunshee