Restitution of executive compensation (Chaim Saiman, 2 Jan 2009)

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Sender:	Chaim Saiman
Date:	Fri, 2 Jan 2009 20:16
Re:	Restitution of executive compensation

Dear Friends,

Is anyone aware of any English/Commonwealth decisions similar to Scrushy v. Tucker, 955 So. 2d 988 (Ala. 2006).

Scrushy deals with a company that restated its earnings due to accounting fraud. The court ruled that, once the fraud was realized and it became clear that the company lost money (during the years that everyone had thought it was making money) the CEO had to pay back the "target bonuses" received in previous years. Importantly (for the US courts) the court held that no fraud or scienter was required, although I suspect that anyone on this list reading the case will cringe at the court’s sloppy use of restitution terminology.

Perhaps to broaden the inquiry a bit, any thoughts as to how to conceptualize a "mistake" in the company’s earnings? Not every mistake in valuation is reflected in retroactive earnings restatements, sometimes it’s simply realized in next quarter’s balance sheet.

Thanks
--cs

Chaim Saiman
Assistant Professor
Villanova Law School
610.519.3296
view my research at http://ssrn.com/author=549545

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