Use of SOX Clawback for Executives Who Did Not Engage in Misconduct

Bradley J. Bondi and Emily J. Rockwood of Cadwalader, Wickersham & Taft write that although a decade has passed since Sarbanes-Oxley became law, the SEC has brought only a few actions under Section 304, intended to prevent CEOs and CFOs from profiting from corporate misconduct. Until 2009, all of these enforcement actions had been in cases where the CEOs and CFOs participated in the misconduct at issue, but the act provides a broad avenue for the SEC to seek clawbacks from innocent officers, as evidenced by a recent decision.

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