What we are doing today—implementing the statutory clawbacks mandate—is commendable. But how we are doing it—expansively, inflexibly, and impractically—is not. Accordingly, I cannot vote to adopt this rule.
Section 954 of the Dodd-Frank Act generally requires the Commission to direct exchanges to require listed companies to “develop and implement a policy” for disclosing how they handle incentive-based compensation tied to reported financial information and, when that reported information has to be restated, a policy for clawing back related erroneously awarded compensation.[1] Congress did not prohibit us from allowing listing exchanges and issuers some flexibility in crafting, respectively, the required listing standards and policies and procedures. Nor did Congress, in adopting this provision, prohibit us from using our exemptive authority under Section 36 of the Exchange Act, which allows the Commission to tailor the implementing regulations if doing so is “necessary or appropriate in the public interest, and is consistent with the protection of investors.”[2] Instead of taking advantage of this statutory flexibility, the release before us adopts a prescriptive approach that, because of its breadth and inflexibility, in some cases, could impose costs on shareholders greater than the benefits they derive from the clawbacks.
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