ANALYSIS: Three Ways to Slice a ‘Clawback’ of CEO Pay

The executive pay “clawback,” an enforcement tactic that first emerged after the Enron accounting scandal, has been reintroduced recently after the sudden closures of Silicon Valley Bank and Signature Bank.

Lawmakers in April hammered the banks’ CEOs to return their $8 to $10 million annual compensation packages—a small concession for their actions, which were a tremendous drain on the Deposit Insurance Fund that required the Federal Deposit Insurance Corporation (FDIC) to impose billions of dollars in new fees on the banking sector.

The clawback is often proposed as a measure to hold executives accountable for their misconduct. But despite ...