In the spring of 2009, public outcry erupted over the multi-million dollar bonuses paid to AIG executives even as the company was receiving TARP funds. Various measures were proposed in response, including a ninety percent retroactive tax on the bonuses, which the media described as a “clawback.” Separately, the term “clawback” was also used to refer to remedies potentially available to investors defrauded in the multi-billion dollar Ponzi scheme run by Bernard Madoff. While the media and legal commentators have used the term “clawback” reflexively, the concept has yet to be fully analyzed. In this Article, we propose a doctrine of clawbacks that accounts for these seemingly variant usages. In the process, we distinguish between retroactive and prospective clawback provisions, and explore the implications of such provisions for contract law in general. Ultimately, we advocate writing prospective clawback terms into contracts directly, or implying them through default rules where possible, including via potential amendments to securities regulation laws. We believe that such prospective clawbacks will result in more accountability for executive compensation, reduce inequities among investors in certain frauds, and overall have a salutary effect upon corporate governance.
Volume 94 - No. 2
- Balancing First Amendment Rights with an Inclusive Environment on Public University Campuses
- Note: Affirmative Action: The Constitutional Approach to Ending Sex Disparities on Corporate Boards
- Academic Freedom To Deny the Truth: Beyond the Holocaust
- Free Speech, Higher Education, and the PC Narrative
- A Close-up, Modern Look at First Amendment Academic Freedom Rights of Public College Students and Faculty
© 2011-2016 Minnesota Law Review. All Rights Reserved.