Executive Pay and Loyalty

Government - Enforcement of Loyalty, and Clawbacks


Economic Espionage Act of 1996

Excessive Compensation

Exchange Act Section 10D (added by Dodd-Frank Section 954) -- clawback applicable to executive offices of public companies for compensation based on financial results changed in a required financial restatement.

Honest Services Law -- penalizes bribery and kickback schemes per Skilling v. U.S. (Sup. Ct. 6/24/2010).

Securities Disclosure Rules -- reported here are cases involving litigation -- by the SEC, shareholders, and others -- relating to failures to properly disclose executive compensation.

SOX 304 -- clawback applicable to CEO and CFO of public companies if fraud or misconduct results in a required financial restatement.

SOX 402 - Prohibition on Certain Insider Loans -- For a well recognized discussion of the SOX 402 implications of different executive compensation practices, see what is known as the Top 25 Memo that may law firms joined together to publish in 2002.  And see this Harvard Governance Blog for SEC action in 2013. 


2013.Apr.18  SEC and 10b5-1 Plans.  Bloomberg BNA reports as follows: 

The Securities and Exchange Commission has not reached a conclusion as to whether there is abuse of so-called Rule 10b5-1 stock trading plans or whether it should amend the rule or provide additional guidance, a senior official said April 18. Thomas Kim, chief counsel of the SEC's Division of Corporation Finance, was responding to recent media reports that some corporate executives may be abusing the program.

For background, see this Harvard Governance blog from 3/18/2013.

2012.Aug.15  Government Healthcare Regulators Flex Muscle in Executive Issues
As part of settling Dept. of Justice claims, GlaxoSmithKline has agreed to a Financial Recoupment Program that "puts at risk of forfeiture and recoupment an amount equivalent to up to 3 years of annual performance pay (i.e., annual bonus, plus long term incentives) for an executive who is discovered to have been involved in any significant misconduct." Details appear in Appendix E of GSK's Corporate Integrity Agreement with the Dept. of Health and Human Services.
Meanwhile, the FTC has
 announced a settlement under which "Renown Health, the largest provider of acute care hospital services in northern Nevada, will release its staff cardiologists from 'non-compete' contract clauses, allowing up to 10 of them to join competing cardiology practices.