The Department of Justice’s newly launched compensation and clawback pilot program is certain to bring with it numerous implementation hurdles and jurisdictional challenges, but it also incentivizes companies to have in place a bulletproof clawback policy. Overcoming the legal and compliance hurdles can mean the difference between a policy that is enforceable, and one that is not.
“Every corporate resolution involving the Criminal Division will now include a requirement that the resolving company develop compliance-promoting criteria within its compensation and bonus system,” Deputy Attorney General Lisa Monaco said in remarks formally announcing the pilot program in early March.
The pilot program aims to encourage ethical behavior through the use of clawbacks. “Companies should ensure that executives and employees are personally invested in promoting compliance—and nothing grabs attention or demands personal investment like having skin in the game, through direct and tangible financial incentives,” Monaco said.
Implementation hurdles
While well-intentioned, the pilot program is potentially fraught with legal and compliance challenges for any company that finds itself in settlement talks with the Criminal Division. Josh Alloy, labor and employment counsel at Arnold Porter, said that part of the challenge for companies is the pilot program is a policy, not a law, which could make enforcing a clawback policy more difficult for companies.
One key factor for how easily...
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