What is it?
A clawback refers to the recovery of money which has been already paid to a person or company, typically because that payment should not have been made for legal (or occasionally moral) reasons. It can also refer to the recovered money itself. Clawback provisions in a contract may entitle a party (e.g. the company’s shareholders or creditors) to claw back (= recover) excessive salaries or bonuses paid to the company’s directors, for example, if it can be shown that those payments damaged the company’s ability to fulfil its commitments to that party. As the news headlines below suggest, the expression is usually used in a compound noun (e.g. clawback provisions, clawback clause) or as a phrasal verb (to claw sth back).
Why is the term in the news?
Many companies around the world, especially financial institutions, have recently been bailed out (rescued) by huge injections of taxpayers’ money. When the same companies then pay large amounts of money in the form of bonuses or pensions to their own managers and directors, it can generate widespread public anger. Recent examples include AIG in the US, which caused an outcry by paying bonuses worth $218 million to its executives in March, despite earlier having received a $170 billion rescue package from the government. In the UK, the former boss of Royal Bank of Scotland obtained a pension worth £16.9 million shortly before the bank had to be rescued from bankruptcy by the government. In both cases, the government has attempted to claw back some of the money either directly (in the case of the bonuses, which may have to be repaid) or indirectly (in the case of the pension, where the directors who negotiated it may be sued).
How can I use it in class?
Where can I read about it?
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