💷 Adjustment and clawback rule

About this category

A clawback rule is a regulation that requires a company to take back compensation that was awarded to an executive if the company's financial performance subsequently declines. A adjustment rule is a regulation that requires a company to take back compensation that was awarded to an executive if the company's financial performance subsequently declines and the executive is found to have been at fault for the decline.

💷 Adjustment and clawback rule

templates

Overestimated Performance Rule For Option Plans (Adjustment And Clawback)

A rule for a share option plan that allows for option holders' rights to be adjusted, and any acquired shares or realised gains to be clawed back, if the performance which allowed the option to vest is later found to have been overestimated.

What to watch out for

  • The rule should provide for option holders' rights to be adjusted if performance is later found to have been overestimated
  • The rule should provide for any acquired shares or realised gains to be clawed back if performance is later found to have been overestimated
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    Associated business activities

    Adjust or claw back options

    If an employee is fired or leaves the company, they may be required to return any unvested stock options. This is known as a clawback. Adjustments can also be made if the options were granted at an exercise price below the market price at the time of grant, or if the options were granted with an exercise period that is shorter than the vesting period.

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