clawback provision

Definition

A contractual clause allowing a company to demand return of previously paid compensation, typically when executives are caught cooking the books or performance metrics turn out to be fiction. It's the corporate equivalent of 'give me back my money.'

Example Usage

After the restatement revealed fraudulent revenue recognition, the board invoked the clawback provision to recover the CEO's bonus.

Origin

Emerged prominently after the Enron scandal and was codified in the Sarbanes-Oxley Act of 2002

Fun Fact

The Dodd-Frank Act requires public companies to have clawback policies, but enforcement has been notoriously weak until recently.

Source: Corporate governance and executive compensation terminology

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