(Reuters) — The U.S. Securities and Exchange Commission voted on Wednesday to adopt new rules that expand the regulator’s powers to claw back executives’ compensation when companies restate their financials due to compliance lapses.
The rule, mandated by Congress after the 2007-2009 financial crisis, was left unfinished in 2015 but revived by the SEC under Chairman Gary Gensler last year as part of a broader effort to crack down on corporate abuses by strengthening the agency’s tools to punish. managers.
SEC commissioners voted 3-2 in favor of the new rules, with the two Republican commissioners voting against the proposal and the two Democratic commissioners voting for it along with Gensler.
The new rules apply to public companies of all sizes and to all policy-making executive officers who have received incentive compensation, including stock options, dramatically expanding the scope of the agency̵7;s existing clawback powers, which were created in 2002.
The SEC can use the new powers to recover compensation in excess of what the affected executive should have received in the event that a company has to restate its financials due to “material non-compliance” with securities laws.
The rules apply to compensation paid in the three years up to the recalculation, regardless of whether the inaccuracy is due to irregularities, errors or some other factor.
They also call on US exchanges to establish listing standards that require each issuer to develop and implement such a policy.
Issuers that do not adopt and comply with compensation recovery policies in accordance with the standards of the rule will be subject to delisting.