Executive Pay Clawbacks Are Gratifying, but Not Particularly Effective

If the goal is to keep corporate executives honest, compensation clawbacks aren’t doing the job. That’s what the recent action by Wells Fargo’s board shows. Yes, the bank’s directors acted on Tuesday to recover $60 million in stock grants from two top executives in the wake of the phony-account-opening scandal. But the move came almost three years after the improprieties came to light — and should serve as Exhibit A for the shortcomings in these pay recovery programs. Recouping compensation from top executives involved in misconduct seemed like a great idea after the Enron and WorldCom accounting scandals. Initially, Congress assigned the task to the Securities and Exchange Commission, the nation’s top securities regulator.

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