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The SOX 'Clawback' Provision

By G. William Tysse
January 28, 2010

Big bonus payouts at troubled financial institutions in the midst of the recent financial crisis have pushed executive compensation issues into the public spotlight. The stimulus bills passed in late 2008 and early 2009 each contained a package of executive compensation restrictions for institutions taking government TARP funds. The SEC, motivated by the belief that pay practices contributed to the crisis, has proposed rules requiring all public companies to disclose how their compensation arrangements align with their risk management objectives. A plethora of bills currently pending in Congress ' following up on policy initiatives advanced by the Obama administration in June ' would impose new independence requirements on compensation committees and their advisors, and require all public companies to offer their shareholders a non-binding vote on their executive compensation programs.

Section 304

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