A special compensation committee meeting may be required to ensure your company’s clawback policies are compliance ready, according to Pay Governance’s recap from a recent SEC meeting with the American Bar Association. Noting that “an extension might be difficult,” the SEC suggested the actual effective date is June 9th (given that June 11th falls on a Sunday) and companies will have until August 8th to implement policies that comply with the new regulation.
The Center had previously reported on our efforts requesting an extension to be no sooner than November 28, 2023, the deadline specified in the Adopting Release and succeeded in part, with the deadline moving from April to June. For a detailed playbook, see Willis Towers Watson’s three-part series on reconciling current clawback policies with the new requirements, reviewing communications that reference pay decisions – from plan documents to memos detailing how incentive targets are set – and the mechanics of recouping money including the use of deferred compensation.
Pay Versus Performance. The SEC staff discussed the initial year of pay versus performance disclosures, indicating they did not have any major concerns with the early disclosures and will not “play gotcha” for those who reasonably tried to follow the mandate even if the company’s initial interpretation missed the mark with the SEC’s intention. Companies that failed to provide the disclosure completely (a handful) will likely receive letters. The staff said they expect to issue additional guidance this year on unresolved issues but have not decided if they will issue a full “PVP Recap” report on compliance.
Rule 10b5-1. Finally, the staff clarified that a sell to cover trading plan directing the sale of shares be based on the highest marginal tax rate might be considered an exempt plan under 10b5-1. Currently, the exemption applies to sell to cover plans directing shares be sold upon vest using minimum required withholding.
Published on: May 19, 2023
Authors: Megan Wolf
Topics: Executive Pay Legislation and Regulation, Executive Pay Plan Design

Megan Wolf
Director, Practice, HR Policy Association and Center On Executive Compensation