The Carrot-And-Stick Approach To Incentive Compensation
By Kevin LaCroix, RT ProExec (November 30, 2016, 12:06 PM EST) -- One of the recurrent governance proposals to remedy corporate excesses has been the idea of clawing back the compensation paid to company officials who presided over corporate scandals. Both the Sarbanes-Oxley Act and the Dodd-Frank Act included provisions mandating compensation clawbacks for corporate executives at companies that restate their financial statements. As Columbia Law School professor John Coffee details in his Nov. 21, 2016, CLS Blue Sky Blog article, "Shareholder Activism in the Era of Trump: What Strategy Works?" despite these statutory revisions, the use of "extreme incentive compensation" continues to motivate corporate behavior. In order to counterbalance the impact of incentive compensation, Coffee suggests that companies should adopt their own compensation clawback requirements that apply more broadly than the statutory clawback provisions....
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