After years of inaction, the SEC is apparently now ramping up its efforts to enforce the "clawback" provision of the Sarbanes Oxley Act. The provision allows the recovery of incentive compensation from the CEO and CFO if the financial results on which the awards were based are later restated. After recently suing two retired executives under the provision, the SEC has now sent a “Wells Notice” to the CEO of Beazer Homes USA, telling him that the staff has recommended that proceedings be brought to recover some or all of his incentive pay.
Neither in this case nor in the other two were the targets of the claim accused of any wrongdoing in connection with the misstated financials. The statute itself is silent on whether wrongdoing by the "clawee" is a requirement for a clawback claim. As these cases mount up, it is becoming more and more likely that the courts will have to rule on that issue.
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