New SEC compensation clawback rule - what's the impact on executive compensation?

Following the implementation of the rule, 103 companies noted that financial statements were corrected. One company indicated that a clawback might be required.

When SEC Rule 10D-1, which requires companies to claw back erroneously paid compensation after accounting corrections, went into effect on December 1, 2023, I predicted that we might see a post-implementation diversity in practice.

My preliminary analysis of roughly 3,500 10-K filings filed between January 1, 2024, and March 15, 2024, finds inconsistencies in the company's decision to provide compensation recovery analysis and points to possible diversity in practice in disclosure of footnotes-only corrections.

Regulatory requirements

Rule 10D-1 of the Exchange Act of 1934 requires issuers to clawback excess compensation paid based on accounting metrics that were subsequently revised or restated to correct accounting errors.

The rule requires companies to adopt a clawback policy by December 1, 2023, and attach such a policy as an exhibit to the annual report. The rule also requires companies to dis…