Close Menu
The London News
    Facebook X (Twitter) Instagram
    Facebook X (Twitter) Instagram Vimeo
    The London News
    Subscribe Login
    • Tech
    • Fitness & Health
    • Business
    • Finance
    • Food & Drink
    • Lifestyle
    The London News
    • Terms & Conditions
    • Privacy Policy
    • Advertise With Us
    Home»Business»To retrieve bonuses paid in error, companies must improve their contracts
    Business

    To retrieve bonuses paid in error, companies must improve their contracts

    EditorBy Editor6 June 2024No Comments2 Mins Read
    Facebook Twitter Pinterest LinkedIn Tumblr WhatsApp VKontakte Email
    Share
    Facebook Twitter LinkedIn Pinterest Email

    If a company awards a bonus to employees based on financial performance and it later turns out that the results were incorrect, or were achieved by improper means, a clawback clause can be used to retrieve this money.

    However, companies need to be more careful about their wording on these clawback clauses, says a study from Nyenrode Business University.

    In previous studies, clawbacks have been discussed in a binary way: a firm either does or does not have a clawback. However, there are strong clawbacks and weak clawbacks, the study shows, and firms need to ensure their clawbacks are strong enough.

    A weak clawback, for example, might say that the firm can recover bonuses from senior executives whose fraud or misconduct resulted in a significant financial restatement. In this case, not only is fraudulent behaviour extremely difficult to prove, but it also allows for only the recovery of bonuses, not other incentive compensation.

    By comparison, a strong clawback might read something like, “The company will use reasonable efforts to recoup any excess incentive-based compensation paid in the three years prior to the restatement to any current or former executive officer”. This clawback policy doesn’t need fraudulent misconduct, nor is it limited to bonus payments. It spans multiple years and covers former executives.

    To rank the strength of these clawbacks, the researchers developed an innovative Clawback Strength Index, based on the analysis of nearly 4,500 clawback provisions.

    The research has already served as input for a legislative change in SEC regulations in the US. As a result, listed US companies will have to implement and enforce strong clawback clauses from the end of 2023.

    Professor Dr Michael Erkens, a researcher on the study, says: “Our research has a major impact on how thousands of companies have to design executive compensation contracts. It also impacts how executives behave, how investors can select ‘well’ managed companies, how researchers can identify unobservable corporate incentives, and how new legislation is designed.”

    Featured Photo by Campaign Creators on Unsplash.

    • Editor
      Editor
    Share. Facebook Twitter Pinterest LinkedIn Tumblr WhatsApp Email
    Previous ArticleSpirituality at business school – POLIMI Graduate School of Management is helping students find their higher purpose
    Next Article Kate Lois-Elliott brings new show to London before Edinburgh Fringe debut how to belong without joining a cult
    Editor
    • Website

    Related Posts

    Click it Flooring In design collaboration with Batley Multi Academy Trust

    15 July 2025

    NormCyber appoints Mark Lee as Sales Director

    10 July 2025

    Learning & Communications specialists Mediazoo announces it has joined the ‘Skills Symphony’ consortium of learning & training providers as founding member

    8 July 2025

    Access Self Storage Team Complete Half Marathon Raising Almost £2,000 for Cancer Research UK

    2 July 2025
    Our Picks

    An Icon, Reimagined

    15 July 2025

    Country Revival

    15 July 2025

    Architect-Designed Home With an Urban Front Door

    15 July 2025

    Click it Flooring In design collaboration with Batley Multi Academy Trust

    15 July 2025
    • Facebook
    • Twitter
    • Pinterest
    • Instagram
    About Us
    About Us

    We're accepting new partnerships right now.

    Email Us: [email protected]

    Our Picks

    An Icon, Reimagined

    15 July 2025

    Walthamstow’s hometipple welcomes award-winning chef Marie Mitchell

    11 July 2025

    Quantum-Resistant Encryption: Preparing for the Post-Quantum Era of Cybersecurity

    10 July 2025
    Subscribe to Updates

    Subscribe to Updates

    Get the latest creative news from The London News

    Facebook X (Twitter) Instagram Pinterest
    • Terms & Conditions
    • Privacy Policy
    • Advertise With Us
    © 2025 by The London News.

    Type above and press Enter to search. Press Esc to cancel.

    Sign In or Register

    Welcome Back!

    Login below or Register Now.

    Lost password?

    Register Now!

    Already registered? Login.

    A password will be e-mailed to you.