Cos ensure payback if execs flout norms – Suresh Raina, Partner quoted in Times of India

Clawback Clauses in employment contracts are in the spotlight following the sacking of Chanda Kochhar as ICICI Bank CEO, and the lender’s decision to get her to repay bonuses since 2009 and even revoke ESOPs.

According to Executive Search firms, there is a growing trend of firms putting several such clawback clauses while hiring senior executives. “When you have a potent combination of various levers to drive performance and delivery — including performance-led incentives and benefits and perks — it is bound to introduce enhanced complexities
in the total annual payout design,” said Hunt Partners managing partner Suresh Raina.

“At the time of departure, all the annual, term-bound payouts come into consideration and need a deft and creative handling. The sums involved are large (some are upwards of $75,000) and become a retention tool. Yet the talent hunt leaves few options for the hiring company to find a way to compensate the candidate and, by the time you are done, it looks like a financial contract and less of an employment contract,” added Raina.

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