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Member, Beacon International Group, Ltd.
Two particularly significant parts of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act are its clawback and “say-on-pay” provisions, say experts.
Kevin LaCroix, an attorney and executive vice president of RT ProExec, a division of R-T Specialty, based in Beachwood, Ohio, said the clawback provision in the 2002 Sarbanes-Oxley Act related to enforcement actions against CEOs and chief financial officers for bonus compensation stemming from restatements made because of wrongdoing.
Under Dodd-Frank, this provision has been expanded so enforcement action can be taken even in cases where there “is no suggestion” the CEO or CFO “was involved in, or had awareness of the wrongdoing that resulted in the restatement, so it's been somewhat controversial.”
Furthermore, said Mr. LaCroix, the Dodd-Frank clawback provision increases the company officials who can be subject to it beyond the CEO and CFO and extends the period it is applicable from one year to three.
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Trevor Howard, senior vice president, U.S. management liability, for Liberty International Underwriters in New York, said, “Obviously, anyone who is an executive officer should be concerned” there is a “mechanism in place where potentially their compensation can be clawed back.”
Jack Flug, New York-based managing director in Marsh Inc.'s FINPRO unit, said under Dodd-Frank, shareholders have greater power on the “say on pay” or executive compensation issue. “There's a possibility that, in the future, we'll see more activity from a litigation standpoint against companies in that arena,” he said.
Mr. Flug said, “We've had some interest from clients,” as to whether the brokerage knows defense firms that are expert on this issue, “although it is such a new area, little specialized expertise has developed to date.”