In "Compensation Clawbacks: Not Just for Public Companies?", Foley explains why private companies may wish to implement compensation clawback policies and suggests relevant design considerations. Among the benefits to policy implementation, clawback arrangements: (i) ensure executives won't be overpaid in the event of a financial restatement or reputational or financial harm to the company; (ii) reduce potential incentives for executives to take inappropriate actions or make inappropriate decisions; and (iii) alleviate uncertainties and risks associated with payments made on the basis of unaudited financials, which may later be revised or restated.
Access additional information & resources on our Hedging & Pledging page. This post first appeared in the weekly Society Alert!