Key takeaways

• The SEC has proposed long-awaited clawback rules for incentive-based compensation that would require most listed issuers (including foreign private issuers) to adopt and comply with policies to recover, on a pre-tax basis, excess incentive-based compensation paid to executive officers in the event of financial statement errors, regardless of fault.
• The proposed clawback rule would apply to incentive-based compensation determined based on financial or stock-based performance measures, but not to items like salaries, discretionary bonuses and awards based solely on length of service.
• Listed issuers would be required to publicly disclose, among other things, the substance of their recovery policies, and the details of their implementation and recovery efforts.
• The rules are subject to a 60-day comment period and are unlikely to apply in the upcoming 2016 proxy season.