Can a new Department of Justice enforcement approach make clawback policies covering criminal activities a best practice?

TAKEAWAYS

• The DOJ is implementing a new policy under which prosecutors will make clawback policies for employee and director compensation a key factor in reaching corporate criminal resolutions and setting fine levels, establishing a potent incentive for companies and driving potential new best practices.
• All companies are impacted by the policy, and public companies in particular that have or are implementing clawback policies in light of Dodd-Frank should consider whether and how to adjust these policies to account for the broader DOJ policy.
• U.S. state-level employment laws, as well as those of other countries, may complicate or even prohibit clawback policies, making it important to consider the location of companies and employees.

On March 2, 2023, Deputy Attorney General (DAG) Lisa Monaco announced a new Criminal Division policy for Department of Justice (DOJ) prosecutors to consider the implementation of compensation clawback policies as an important factor in corporate criminal resolutions. This policy is aimed at incentivizing both public and private companies to incorporate clawback clauses into contracts and compensation policies for employees, officers and directors.

As a result, companies may want to consider their response to the new DOJ policy in risk management and compliance planning, and coordinate with human resources, outside...

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