clawback provision
The Dodd-Frank Act includes a clawback provision that allows companies to recover (i.e., "claw back") monies paid to current and former directors and officers under incentive compensation plans.
Additional Information
Such repayments are required under the law if a subsequent financial restatement eliminates the basis for these incentive payments. For example, assume a company must issue a financial restatement that states lower earnings than were initially reported. If, under the company's incentive compensation plan, bonuses were paid as a result of these (originally) higher earnings, under Dodd-Frank's clawback provision, executives are required to return such payments to the company.
