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Restating Earnings May Mean Executive-Pay Clawbacks

SEC proposal would require companies that restate earnings due to accounting errors to reclaim a portion of bonuses to executives including chief accounting officers and VPs of finance.

By Dave Michaels, Bloomberg | Updated on July 02, 2015

U.S. companies forced to correct accounting failures would have to reclaim a portion of bonuses awarded to corporate bosses under a rule proposed Wednesday by the Securities and Exchange Commission (SEC).

The SEC measure, passed on a 3-2 vote, would expand the circumstances under which executives could be punished if their firms restate past earnings. Companies would have to claw back stock or cash bonuses based on erroneous results even if it wasn’t intentional.

"Executive officers should not be permitted to retain incentive-based compensation that they should not have received in the first instance." --Mary Jo White, Chair, SECThe change would build on rules—approved more than a decade ago in response to fraud at Enron Corp. and WorldCom Inc.—that permitted clawbacks only when it could be shown that books were cooked intentionally.

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