Clawing back compensation is shaping up to be a key part of the U.S. Securities and Exchange Commission's (SEC) agenda as it cracks down on corporate misconduct, raising the stakes for thousands of executives who could potentially lose millions of dollars in bonuses and stock sale profits, Reuters reported. Last week, the SEC said that it would revive a rule left unfinished from the 2007-09 financial crisis that would require U.S.-listed companies to implement a plan to recoup executive compensation in the event they have to correct financial statements due to compliance failures. But in behind-the-scenes enforcement talks with companies, the SEC has already dusted off a narrower clawback power created in 2002 following the Enron and WorldCom accounting scandals, according to four lawyers familiar with the private discussions. That rule allows the SEC to force a public company's chief executive or chief financial officer to return bonuses or other incentive-based pay in the event the company restates its results due to misconduct. In 2016, a federal court settled a lingering question over whether the SEC could recoup pay from executives who were not directly accused of wrongdoing. It said the agency could, because the executives should not profit from the proceeds of foul play. In nearly two decades, however, the SEC has used the 2002 clawback power sparingly overall, despite potentially hundreds of opportunities to so, and just 15 times to penalize executives who were not directly accused of misconduct, according to a new analysis by law firm Covington and Burling LLP.
