Sometimes a polite request is not enough. In October, as it settled charges with the US government over the 1MDB scandal, Goldman Sachs said it would seek to take back $175m of pay from employees. These included a group of senior executives, as well as bankers involved in thefts from the Malaysian wealth fund.
Gary Cohn, the Goldman bigwig who left in 2016 to join Donald Trump’s administration, continues to negotiate with Goldman over what he should hand over. Former colleagues, including current chief executive David Solomon and predecessor Lloyd Blankfein, have agreed to pay up.
In a strong statement in October, Mr Solomon said of the clawback: “The board’s announcement is an important reminder that we are all responsible for each other’s actions, including our collective failures.”
A limited form of clawback was required in executive compensation plans as a part of Dodd-Frank Act reforms. These have still not been finalised. No matter. One study says 90-100 large companies have adopted clawback language in response to shareholder pressure.
The size of the cheques requested varies depending on the wrongdoing and just how punitive boards of directors want to be. Critics point out that the amounts involved will still generally leave former executives with massive fortunes.
Even so, clawback is a useful lower-level adjunct to such traditional curbs on malfeasance and lax oversight as regulation, law enforcement and social stigma.
The former chief executive of McDonald’s is, for example, currently in a dispute with the fast-food chain that allowed him to leave with a roughly $40m package. Steve Easterbrook has since been accused of workplace misconduct. The company now wants its money back.
Clawbacks expose executives to personal penalties for alleged bad behaviour: their own, or that of subordinates. Mr Cohn and Mr Easterbrook are within their rights to challenge these impositions. But the longer they hold out, the longer public scrutiny of their past actions will continue. Such wrangling is a particularly bad look when former colleagues have kept stumm and stumped up.
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