Clawback provisions are contractual clauses that allow an employer or company to reclaim previously paid compensation, typically bonuses or incentives, from an employee under specific circumstances, such as financial misstatements or misconduct. These provisions aim to protect the organization’s interests by holding individuals accountable for actions that negatively impact the company’s financial health or reputation.
Section 1. Overview. The purpose of this Amended and Restated Clawback Policy of the Company (as amended from time to time, the “Policy”), dated as of September 13, 2023 (the “Adoption Date”) is to set forth (i) recoupment terms applicable to current and former Executive Officers (as defined below) pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as codified by Section 10D of the Exchange Act, and the rules and requirements of the NYSE (including Section 303A.14 of the NYSE Listed Company Manual) (such legal requirements, and rules and requirements of the NYSE, collectively, the “SEC/NYSE Clawback Rules”), as provided in Section 3 of this Policy and the other applicable provisions set forth herein (such recoupment terms, the “NYSE Clawback Provisions”), and (ii) recoupment terms applicable to Discretionary Clawback Participants as provided in Section 4 of this Policy and the other applicable provisions set forth herein (such recoupment terms, the “Discretionary Clawback Provisions”).
Section 3. NYSE Clawback Provisions. 3.1. Recoupment of Erroneously Awarded Compensation from Executive Officers. In the event that the Company is required to prepare an Accounting Restatement, (i) the Committee shall determine the amount of any Erroneously Awarded Compensation for each applicable current or former Executive Officer (whether or not such individual is serving as an Executive Officer at such time) (the “Applicable Executives”) in connection with such Accounting Restatement, and (ii) the Company will reasonably promptly require the recoupment of the amount of such Erroneously Awarded Compensation from any such Applicable Executive, and any such Applicable Executive shall surrender such Erroneously Awarded Compensation to the Company, at such time(s), and via such method(s), as determined by the Committee in accordance with the terms of this Policy.
5.3 Method of Recovery. In the event that (i) recoupment is required pursuant to the NYSE Clawback Provisions, and/or (ii) the Committee has elected to require recoupment pursuant to the Discretionary Clawback Provisions, the Committee shall determine, in its sole discretion, the method(s) for recouping any Erroneously Awarded Compensation from any Clawback Policy Individual subject to such recoupment, which may include:
Without limiting the mandatory clawback provisions applicable to any Covered Officer, in the event of a Financial Statement Restatement Event or upon a determination by the Board (or an authorized committee of the Board) that a Covered Employee has engaged in Misconduct, the Board may, to the extent permitted by law and to the extent it determines that it is in the Company’s best interests to do so, in addition to all other remedies available to the Company, recover from the Covered Employee all or a portion of any erroneously awarded Incentive-Based Compensation received by such Covered Employee (including by requiring cancellation or reimbursement or payment of such Incentive-Based Compensation).
In the case of a Financial Statement Restatement Event, Incentive-Based Compensation shall be considered “erroneously awarded” to a Covered Employee in the same manner as set forth above in the mandatory clawback provisions of this policy. In the case of any Misconduct by a Covered Employee, Incentive-Based Compensation shall be considered “erroneously awarded” to a Covered Employee to the extent such Incentive-Based Compensation (1) is received with respect to any performance period for the relevant Incentive-Based Compensation during which such individual shall be determined to have engaged in Misconduct, and (2) the Board (or an authorized committee of the Board) determines that such individual should not have been entitled to the amount of such received Incentive-Based Compensation as a result of such employee’s Misconduct.
This policy supplements (1) application of the clawback provisions found in Sarbanes-Oxley Section 404 and any other applicable laws and regulatory rules, (2) clawback provisions in company governing documents applicable to breaches of restrictive covenants, and (3) any clawback provisions that exist in any particular employment agreement.
a.The Board or the Committee will administer the Dodd-Frank Act Clawback Provisions of this Policy in accordance with the Final Guidance, and will have full and exclusive authority and discretion (including to engage experts, consultants and/or other advisors for opinions, advice and/or guidance regarding this Policy and its operation) to supplement, amend, repeal, interpret, operate, terminate, construe, modify, replace and/or enforce (in whole or in part) the Dodd-Frank Act Clawback Provisions of this Policy, including the authority to correct any defect, supply any omission or reconcile any ambiguity, inconsistency or conflict in the Policy, subject to the Final Guidance. Otherwise, the Board or the Committee has the exclusive power and authority to reasonably administer this Policy, including to supplement, amend, repeal, interpret, operate, terminate, construe, modify replace and/or enforce (in whole or in part) the other portions of this Policy, and all reasonable actions, interpretations and determinations taken or made by the Board or the Committee thereby will be final, conclusive and binding.
(h)Clawback/Recovery. All Awards and payouts under the Plan will be subject to recoupment in accordance with the following provisions, as applicable and subject to applicable law (the “Clawback Provisions”): (i) any clawback policy that the Company (x) is required to adopt pursuant to applicable law (including without limitation pursuant to the listing standards of any national securities exchange or association on which the Company’s securities may become listed or as may be required by the Dodd-Frank Wall Street Reform and Consumer Protection Act in the event the Company’s securities become publicly traded and subject thereto) and (y) otherwise voluntarily adopts, to the extent applicable and permissible under applicable law; and (ii) such other clawback, recovery or recoupment provisions set forth in an individual written agreement between the Company or an affiliate and the Participant. No recovery of compensation under such a Clawback Provision will be an event giving rise to a right to resign for “good reason” or “constructive termination” (or similar term) under any agreement with the Company.
(i)Recovery of Mistaken Payments and Payments Subject to the Clawback Provisions. On occasion, the Company or an affiliate may mistakenly overpay or make incorrect payments of Awards or may need to make deductions for any overpaid amounts under the Clawback Provisions. For these situations, to the extent permitted by applicable law, the Company or an affiliate reserves the right to offset or recover such payment amounts from any future payments of compensation to the Participant. By participating in the Plan, the Participant authorizes the Company or an affiliate to reduce from any amounts owed to the Participant by the Company or an affiliate (including without limitation Base Salary, expense reimbursements, other bonuses or accrued vacation pay, notice pay) such mistaken payment amounts and, to the extent the payment amounts are not repaid to the Company or affiliate from such reduction, then the unpaid balance becomes a debt the Participant owes to the Company or affiliate.
8.4 No Duplicative Recovery. To the extent that recovery of Erroneously Awarded Compensation is achieved under the NYSE Clawback Provisions of this Policy (or otherwise under the Final Requirements), then the Committee will credit the amount an applicable Executive Officer has already reimbursed the Company against the amount subject to recovery under the remainder of this Policy. Also, to the extent that recovery of compensation or other amounts is achieved under 15 U.S.C. 7243 (Section 304 of the Sarbanes-Oxley Act of 2002), then the Committee will credit the amount an applicable Covered Officer has already reimbursed the Company against the amount subject to recovery under Section 4 of this Policy.
8.2 Relationship of this Policy to Prior Clawback Policy. The clawback provisions under Section 4 of this Policy represent an amendment, restatement and continuation of the Company’s clawback policies and provisions in effect prior to the Effective Date and applicable under certain circumstances described therein (the “Prior Clawback Policy”). This Policy continues, uninterrupted, but as modified hereby, the Prior Clawback Policy. For purposes of clarification, to the extent any compensation or other amounts or Executive Officers are covered by or subject to the NYSE Clawback Provisions by this Policy’s terms, Section 4 of this Policy will operate only after, and as a supplement to (as opposed to superseding and/or replacing), the NYSE Clawback Provisions regarding such compensation or other amounts or Executive Officers.
Following, and subject to, the Plan Administrator’s determination of actual Awards for a performance period, the Plan Administrator will approve the payment of Awards for such performance period, subject to satisfaction of any continued services or additional conditions established by the Plan Administrator to receive the Award. Payment of Awards under the Plan will be made as soon as practicable after such approval or satisfaction of such conditions, as applicable. However, Awards are not earned until no longer subject to recovery pursuant to the Clawback Provisions described in Section 6(h) below, as applicable. As a result, to the extent the Clawback Provisions described in Section 6(h) below apply, the Company pays Awards in advance of the Participant’s earning of the Award, and such advances are subject to recovery pursuant to the Clawback Provisions described in Section 6(h) below.
We will replace any RSU and/ or MIP awards that you forfeit with Prudential awards of the same value. These replacement awards will be released in line with the vesting timeframe attached to your original awards and will be subject to malus and clawback provisions. Where your current awards have performance conditions, Prudential conditions will be attached to your replacement awards.
A replacement bonus will be paid to compensate you for the loss of your 2018 JP Morgan bonus. 60% of this bonus will be paid in cash with 40% deferred into Prudential ADRs. These ADRs will vest three years after the date of award, subject to malus and clawback provisions.
To avoid doubt, in exercising its powers under these malus and clawback provisions, the Committee may, in its discretion, apply different treatments to: (i) different employees and/or (ii) different remuneration, and may apply such different treatment in combination. These provisions can apply even if you are not responsible for the event in question, or if it happened before the vesting or grant of your performance-related remuneration.
A clawback provision is a contractual clause that allows an employer or company to reclaim previously distributed compensation under certain circumstances. These provisions are typically included in employment contracts, executive compensation agreements, and other financial or legal contracts. The primary aim is to mitigate risks and ensure fairness by allowing the retrieval of bonuses or other incentive compensation if certain conditions are breached, such as financial restatements or misconduct.
Clawback provisions should be used when there is a need to safeguard financial interests and ensure ethical behavior among employees, particularly in situations involving:
These provisions can also be useful tools during mergers and acquisitions or when setting terms for high-risk investment ventures.
Writing a clawback provision involves several key steps to ensure clarity and enforceability:
Define the triggering events: Specify the exact conditions under which the clawback will be enacted, such as financial restatements, misconduct, bankruptcy, etc.
Detail the compensation subject to clawback: Clearly outline which types of compensation (e.g., bonuses, stock options, severance packages) can be reclaimed.
Specify the timeframe: Determine the period after which the clawback provision can no longer be enforced.
Outline the repayment process: Describe how and when the paid compensation must be returned to the company.
Include legal and procedural language: Ensure the provision complies with applicable laws and suits company policies.
Example:
“The Company reserves the right to reclaim any or all bonuses and equity awards paid to the Employee within a two-year period following the publication of a financial restatement due to material noncompliance with any financial reporting requirement under the securities laws, resulting in the Employee’s gross negligence or intentional misconduct.”
Clawback provisions are commonly found in the following types of contracts:
By incorporating clawback provisions, entities can protect themselves against financial losses and uphold ethical standards.
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