DOJ’s Pilot Program on Clawbacks to Foster Individual Accountability Poses Challenges for Companies

March 30, 2023

Cadwalader partners Martin Weinstein and Jeffrey Clark comment on the DOJ Criminal Division’s new pilot program on compensation incentives and clawbacks. The pilot is meant to “encourage companies who do not already factor compliance into compensation to retool their programs and get ahead of the curve,” according to Deputy Attorney General Lisa Monaco. Weinstein says: “Every corporate resolution entered into by the DOJ’s Criminal Division will include a requirement that the company implement criteria related to compliance in its compensation and bonus system.” Added Clark: “The DOJ Pilot Program on Compensation Incentives and Clawbacks has the potential to put companies dealing with employee misconduct in a difficult dilemma. On the one hand, the U.S. Sentencing Guidelines and other DOJ guidance make clear that in order to have an effective compliance program, a company should not employ (or continue to employ) managers who the company knows, or should know, have engaged in illegal or serious non-compliant conduct. On the other hand, in many cases it can be hard to successfully terminate an employee for cause, including because many countries have strict timing requirements for such employment actions that are difficult to meet in the context of an internal investigation.”

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