Two recent clawback actions by the SEC offer lessons for companies. Both cases involved potential clawbacks under Sarbanes-Oxley Act Section 304 for compensation the executives received following the filing of misstated financial statements. Many others have written reported on these cases. However, I want to highlight three specific points.
First, in each case, the executive had voluntarily reimbursed their respective companies and, therefore, the SEC concluded that it wasn’t necessary to pursue a clawback action under SOX Section 304. In one case, the CEO and former CFO reimbursed the company $3,165,852 and $728,843, respectively, for cash bonuses and certain stock awards they received during the period when the company committed accounting violations.
Second, lest you think some amounts might be too small to pursue or the SEC is not vigorously enforcing clawbacks, in one case the CEO reimbursed the company for only $15,234 and the former CFO reimbursed the company for only $11,789 (each for incentive-based compensation they received following the filing of misstated financial statements).
Finally, each case involved executives who were not accused of any wrongdoing. This is consistent with nearly every other SEC action under SOX 304, but it bears repeating.