"Clawback" provisions are being inserted into many more compensation contracts for Wall Street personnel than ever before. The trouble is, the word is used to describe too many different things to be of any practical or legal use.
Reportedly, Citigroup Inc. "will institute a 'clawback' policy to recoup executive compensation based on financial reporting that is later show to be inaccurate," according to a "memo to employees" from CEO Vikram Pandit on New Year's Eve. Serena Saitto, "Citigroup CEO Pandit, Chairman Bischoff Forgo Bonuses (Update 2)" (Bloomberg.com, Wed., December 31, 2008). This by itself conveys no meaning, unfortunately. But it probably sounds good.
Previously, there were not less than four (4) kinds of so-called "clawback provisions" listed by the Corporate Library and summarized in "Clawback Provisions Soar" (Treasury & Risk July-August 2008 at www.treasuryandrisk.com). Their summary includes these four identifiable types in use at that time:
No breach of any provision in any of these nondescriptive categories, each of which bears the same label, should ever be confused with a Common Law Breach of Fiduciary Duties, with at least one possible qualification. To the extent that one or more of these contractual provisions provides the basis for a Fiduciary Relationship, the Courts may declare that the breaching party may have breached Fiduciary Duties which live separate from or together with the Contract. HAPPY HOLIDAYS AND A HAPPY NEW YEAR TO ALL! Please Read The Disclaimer.
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