Companies are withholding a larger share of their executive pay for a longer period of time, hoping to avoid the hassle of recovering money when – or if – executives are later found responsible for misconduct.
The changes are based on recovery clauses that became widespread in compensation agreements and are a recognition by companies that retaining unpaid compensation is easier than trying to recover it, since it is in the hands of an executive.
When it comes to compensation, “the most effective way to get it back is to never pay it,” said Charles Elson, a finance professor at the University of Delaware who helped a consortium of investors and healthcare companies find a new payment – deferring guidelines. “The principle is that [executives] cannot benefit from improper conduct. “
Pharmaceutical manufacturer Bristol-Myers Squibb Co. is demanding that executives hold three-quarters of their stock grants for at least a year after the awards are granted, or become fully executives.
The drugstore chains Walgreens Boots Alliance Inc. and CVS Health Corp. considered misconduct a factor that allows companies to revoke the deferred payment. CVS is also withholding some salaries, even after an executive leaves the company.