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SEC Revisits Stalled Rules for Clawing Back Executive Bonuses

Oct. 14, 2021, 5:00 PM

The U.S. Securities and Exchange Commission is moving to finish up long-stalled rules that would clamp down on executive bonuses when firms misstate financial results.

The SEC re-proposed regulations that would force senior managers to return incentive pay that’s based on incorrect information included in companies’ financial statements, according to a statement. The rules were required by the 2010 Dodd-Frank Act and SEC Chair Gary Gensler on Thursday described the proposal as an opportunity “to strengthen the transparency and quality of corporate financial statements.”

The plan for clawing back inflated pay is one of several regulations stemming from the 2008 financial crisis that federal agencies haven’t finished. Last month, the SEC took up another long-delayed requirement to force money managers to disclose whether they voted in support of shareholder proposals on executive pay.

“When financial statements are wrong corporate executives shouldn’t receive inflated compensation,” Caroline Crenshaw, a Democratic commissioner on the SEC, said in a statement. “If executives are able to keep their pay that’s based on incorrect financial reporting, there’s not a strong incentive to ensure reliability and quality.”

Specifically, the proposal would force public companies to disclose information about their recovery of excess compensation that was based on incentives. The SEC said that it was taking additional comments on the plan, which was first released in 2015, to take into to account more recent regulatory and market developments.

The agency said it will accept public comments on the proposal for 30 days. The agency’s five commissioners would then need to vote to finalize the plan after taking into account any feedback.

To contact the reporters on this story:
Akayla Gardner in New York at agardner81@bloomberg.net;
Ben Bain in Washington at bbain2@bloomberg.net

To contact the editor responsible for this story:
Jesse Westbrook at jwestbrook1@bloomberg.net

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