Updated Clawback Policy template and adopting resolutions provided

On April 24, 2023, the SEC extended to June 11, 2023 the period to approve, or begin the process to disapprove, the NYSE’s and Nasdaq’s proposed listing standards relative to the “clawback” rules.  Those rules require companies to adopt policies and to recoup from executives, following an accounting restatement, incentive-based compensation that was paid based upon financial measures that were restated.  Even with this extension, the process will likely be finished before the original deadline set in the October 2020 “Listing Standards for the Recovery of Erroneously Awarded Compensation” rule.  As we wrote in this post, the rule requires national securities exchanges to propose and adopt listing standards requiring companies to adopt an appropriate clawback policy.  This post contains links to the listing standards proposed by the NYSE and Nasdaq.  This post reviews new disclosures and Form 10-K cover page check boxes required by the rule.

At this time, the relevant dates are:

• • Nasdaq’s and NYSE’s proposed listing standards were published in the Federal Register on March 13, 2023 – so originally, the SEC had until April 27, 2023 to approve the listing standards.
  • The new deadline to approve or begin the process to disapprove the standards is June 11, 2023. 
  • June 11 is a Sunday, so we would assume that they get the same consideration as others when a deadline falls on a Sunday – i.e., the deadline probably is June 12.
  • If the SEC approves the listing standards on or before June 12, 2023, that is the effective date of the listing standards – if they take no action, the listing standards will be effective on June 13, 2023.
  • Companies have 60 days after the effective date of the listing standards within which to adopt a clawback policy – so the outside date (assuming SEC approval by June 12, 2023) will be August 10, 2023, but again, it could be sooner, if the SEC acts before that date.

Gary Brown, Partner at Nelson Mullins Riley & Scarborough LLP, and SEC Institute workshop leader and PLI author, has updated his draft “Incentive Compensation Recoupment Policy” template to incorporate the provisions of proposed listing standards as well as provided a set of template resolutions that could be used by boards to adopt a policy.  The templates are usable by either a NYSE or Nasdaq company.  Here are links to the policy and resolution templates.

As always, your thoughts and comments are welcome!