When errors are found in a company’s books, the responsibility often falls on the finance chief and chief executive who signed off on the numbers. And it is up to the board of directors to decide whether they should be penalized by returning some of their compensation.
The Securities and Exchange Commission is about to issue new rules that would take away a board’s discretion in such cases, and would require companies to punish accounting missteps by clawing back pay from a wider range of top executives. Failure to do so could cost a company its stock listing.
Many companies object to the proposed rules, which are awaiting the SEC’s final approval after a public-comment period ended last month. Corporate critics say the rules could wallop executives who had no knowledge of errors in the books or any role in overseeing them.
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