What is the purpose of a ‘clawback provision’ in executive compensation contracts?
ATo grant executive stock options at a discounted strike price
BTo allow a company to recover paid incentive bonuses if misconduct or financial misstatement occurs
CTo guarantee an automatic cost-of-living pay increment
DTo provide a guaranteed golden parachute upon retirement
Explanation
Clawback provisions allow corporations to recoup previously paid incentive compensation in cases of fraud or restatements.
Exam Relevance
- Topic: Compensation & Benefits
- Subtopic: Executive Compensation

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