TheCorporateCounsel.net

As Meredith recently noted on the Advisors’ Blog on CompensationStandards.com, the 2024 update to Skadden’s Compensation Committee Handbook is now available — now in its 10th edition, it reflects key developments since last spring, including updates for the clawback rules and developments in pay-versus-performance disclosures. In the discussion of clawbacks, it briefly touches on the interplay with other legal requirements, including SOX and state laws:

Committees should keep in mind that certain states, such as California, have laws that generally prohibit the recovery of wages that have already been paid. While the Dodd-Frank clawback rules are currently expected to preempt conflicting state law, litigation activity may be on the horizon to definitively confirm this.

CEOs and chief financial officers (CFOs) remain subject to the clawback provisions of the Sarbanes-Oxley Act of 2002 (SOX), which provide that if a company is required to prepare an accounting restatement because of “misconduct,” the CEO and CFO are required to reimburse the company for any incentive or equity-based compensation and profits from selling company securities received during the year following issuance of the inaccurate financial statements. To the extent that a Dodd-Frank Clawback Policy and SOX cover the same recoverable compensation, the CEO or CFO would not be subject to duplicative reimbursement. Recovery under the Dodd-Frank Clawback Policy will not preclude recovery under SOX to the extent any applicable amounts have not been reimbursed to the issuer.

This guide is posted along with checklists, sample charters and memos in our “Compensation Committees” Practice Area on CompensationStandards.com.

– Dave Lynn