The second session of the IFSEA 2021 Virtual Conference provided an interesting and varied discussion on the regulation, operation and best practice of clawback and forfeiture clauses in senior executive and founder employment incentive and equity agreements, with perspectives from the US, Germany, Italy and the UK. Some of the key takeaways from the session included:
- In the EU and UK, these provisions are most commonly seen in the Financial Services sector but increasingly are moving into other sectors e.g. in Germany, a growing area is directors of listed companies.
- In certain U.S. states, the common law can impose clawback where e.g. an employee is disloyal. They are also increasingly being used as a “pseudo non-compete” in the U.S., as a way of circumventing traditional non-compete law.
- The type of conduct that triggers clawback and forfeiture clauses is not limited to financial conduct alone. Where the conduct is non-financial (e.g. sexual harassment), this can lead to challenging questions for firms as to what extent they are required to be “moral guardians” of their employees’ behaviour, particularly where historic.
- The clauses are found in a number of different places, so read absolutely everything at the outset (and take advice if needed) to ensure that you know what you are signing up to and whether there is scope to negotiate.
Thank you again to our expert panel of speakers for a superb session:
Amit S. Bindra, Partner, The Prinz Law Firm (Illinois, USA)
Dr Johannes Traut, Attorney at Law and Counsel, Seitz (Germany)
Graziana Alò, Lawyer, Daverio & Florio Studio Legale (Italy)
Carol Davis, Barrister, Littleton Chambers (UK)
Beth Hale, Partner and General Counsel, CM Murray LLP (UK) (Chair)
The second International Forum of Senior Executives and Founders (IFSEA) Conference on Risk, Reward and Reputation Management Issues for Senior Executives & Founders was held virtually from Tuesday, 2 February – Tuesday, 16 March 2021. This unique specialist conference ran as a series of virtual international expert panels and two networking events per week, bringing together over 65 leading global experts from 13 countries around the world to discuss issues commonly faced by international Senior Executives and Founders, particularly during these times of global crisis, disruption and opportunity.
View other sessions from the IFSEA 2021 Virtual Conference here.
Find out more about the International Forum of Senior Executive Advisers and become a member here.