Global: 17% of banks ‘clawed back’ compensation in 2011

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A ‘money-back’ policy has been growing in popularity across the world, especially in the financial sector as markets remain in a state of volatility.

According to survey data by Mercer, 14% of global banking organisations have ‘clawed back’ compensation payments made to employees while a further three per cent of organisations have reclaimed the payments but have yet to receive the pay back.

Clawbacks, often described as a ‘money-back’ policy, happens when paid-out compensation is reclaimed based on financial restatement, gross negligence or other malfeasance. It is a common feature in bank compensation structures today.

“There are a variety of reasons why actual clawbacks of payments already made are limited – often the concept conflicts with local labour laws so actually recouping the funds can be difficult,” said Vicki Elliott, Global Financial Services Human Capital Leader, Mercer.

“Clawbacks are relatively new phenomena in compensation programmes so it will take some time or them to bed down. A small number of clawbacks doesn’t signify that the sector is ignoring lessons from the financial crisis but does raise legitimate questions about whether companies will actually see pay-back of compensation paid,” she added.

In Mercer’s report, 44% of banks have had clawback provisions in place prior to 20111.

Although none of the survey respondents in Asia clawed back compensation in 2011, many are undertaking a review towards an enhancement of their clawback policies.

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