Clawback provisions permit an employer to recover compensation already paid. They arise from listing standards, statute, and contract.

Listing standard clawbacks. Listed issuers must maintain and enforce a policy recovering erroneously awarded incentive compensation received by current and former executive officers during a lookback period following an accounting restatement. Recovery is required regardless of fault, with narrow impracticability exceptions, and issuers may not indemnify against it.

Statutory clawbacks apply to certain officers following restatements caused by misconduct, and to particular industries.

Contractual clawbacks in employment agreements and incentive plans, covering misconduct, restatement, breach of restrictive covenants, and competing after departure. These are the broadest and depend entirely on drafting.

Enforceability issues. State wage laws restrict recovery of paid wages in some jurisdictions, which is why clawback provisions target bonus and equity rather than salary and often operate by forfeiture of unvested amounts rather than by demanding repayment.

Practical drafting. Define the triggering events precisely; specify the compensation subject to recovery and the lookback period; provide for set-off where lawful; state the governing law; and require the executive to acknowledge the policy in the award agreement, which is the mechanism that makes later adoption binding.