August 4, 2015
In regards to the "clawback" provisions for Publicly Traded Companies Executive Compensation, the following problem may prove difficult to circumvent. If the executive who did sign the accounting and/or audit report will be dunned for not earning reward for erroneously stated profits, why would anyone include that in his/her compensation contract?
The law of unintended consequence will prevail and compensation contracts will be forced to include a waiver of default, should an executive be required to return compensation. The end result will be the same. The investors will be saddled with a lower valued stock, and the executives will more than likely be compensated with an insurance policy protecting them from the liability threat. The cost of the liability policy will be borne by the shareholders. There must be a provision to protect shareholders from the probability and hidden cost of this event.