An Analysis of Recently Adopted Clawback Provisions - 27 Dec 2010

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An Analysis of Recently Adopted Clawback Provisions | Dodd-Frank and the Law

Section 954 of the Dodd-Frank Act requires national securities
exchanges (meaning, for instance, the NYSE, Amex and Nasdaq) to adopt
rules as directed by the SEC, which rules will require issuers to
develop and implement a policy providing:

• for disclosure of an issuer’s policy on incentive compensation that
  is based on financial information required to be reported under
  securities laws; and


• that, if an accounting restatement is prepared, the issuer will
  recover any excess incentive-based compensation from any current or
  former executive officer who received such incentive-based compensation
  in the three preceding years.

Rules regarding Section 954 of the Dodd-Frank Act have not yet been
proposed or finalized.  However we reviewed recent SEC filings to see
what public companies are doing to prepare for the eventual adoption of
the rules related to clawback policies.

 Adoption of Clawback Policies

 Robbins & Myers. The
board of directors of Robbins & Myers, Inc. adopted a compensation
clawback policy  and approved a compensation clawback acknowledgement
and agreement. The form of acknowledgement and agreement provides that
all annual incentives and other performance-based compensation granted
on or after October 1, 2010 are subject to the clawback policy. The
policy provides that the employee must repay or forfeit any annual
incentive or other performance-based compensation as directed by the
board of directors of the company if:

• the vesting of such compensation was based on the achievement of
  financial results that were subsequently the subject of a restatement of
  the company’s financial statements,


• the employee engaged in fraud or misconduct that caused or contributed to the need for the restatement,


• the amount of such compensation that would have been received by the
  employee would have been lower than the amount actually received, and


• it is in the best interests of the company and its shareholders for the employee to repay or forfeit the compensation.

Caplease. 
Under Caplease, Inc.’s recently adopted clawback policy, the board of
directors may recover incentive compensation paid to any current or
former executive officer of the company if all of the following
conditions apply:

• the company’s financial statements are required to be restated due
  to material non-compliance with any financial reporting requirements
  under the federal securities laws (other than a restatement due to a
  change in accounting rules),


• as a result of such restatement, a performance measure which was a material factor in determining the award is restated, and


• in the discretion of the compensation committee, a lower payment
  would have been made to the executive officer based upon the restated
  financial results.

The clawback policy applies to any incentive compensation paid on or
after December 7, 2010 and the recovery period is the three year period
preceding the date on which the company is required to prepare the
accounting restatement.

 Employment Agreements

 Signet. 
An employment agreement for a new CEO of Signet Jewelers Limited
provides “[t]he Executive shall be subject to the written policies of
the Board applicable to executives, including without limitation any
Board policy relating to claw back of compensation, as they exist from
time to time during the Executive’s employment by the Company.”

 SuperMedia. 
An employment agreement for a new CEO of SuperMedia Inc. provides
“[n]otwithstanding any other provision in this Agreement to the
contrary, any “incentive-based compensation” within the meaning of
Section 10D of the Exchange Act will be subject to claw-back by the
Company in the manner required by Section 10D(b)(2) of the Exchange Act,
as determined by the applicable rules and regulations promulgated
thereunder from time to time by the U.S. Securities and Exchange
Commission.”

Benefit Plans

Dover. 
Dover Corporation recently adopted a severance plan and a
change-in-control severance plan.  Each plan gives the corporation the
right to recover amounts paid to an executive under the respective plan
“if required under any claw-back policy of the Corporation as in effect
from time to time or under applicable law.”

NACCO. 
Nacco Industries, Inc. recently amended its Value Appreciation Plan to
provide “[t]he Employers may recover all or a specified portion of any
Award paid after the Effective Date under the Plan . . . in the event
the Participant, either during employment with the Employers or within
two years after termination of such employment, commits an act
materially adverse to the interests of the Employers or that materially
disrupts, damages, impairs or interferes with the business of the
Company and its affiliates.

Dominion Resources. 
The grant agreement for a recent award of restricted stock to the CEO
of Dominion Resources, Inc. includes provisions regarding:

• recovery of shares in the event of restated financial statements as a result of fraud or intentional misconduct;


• recovery of shares in the event of fraudulent or intentional
  misconduct materially affecting the company’s business operations; and


• the award is subject to any clawback policies the company may adopt to conform to the Dodd-Frank Act.