Compensation Clawbacks Begin to Take Hold in Corporate America

Macy’s Inc. filed its annual proxy statement this year on April 1, also known as April Fools’ Day. Unfortunately for some of the New York-based department store chain’s executives, the company wasn’t joking when it disclosed a portion of their pay would be getting clawed back.

We told you last year about the accounting troubles at Macy’s after the retailer discovered an employee made incorrect accounting entries and falsified documents to hide more than $150 million in delivery expenses accumulated in a span of three years. According to the latest proxy statement filed with the Securities and Exchange Commission, that misstatement boosted some of the metrics upon which Macy’s based its bonus compensation for executives, including adjusted 2023 EBITDA. The company overstated its earnings by roughly $80 million as a result, so Macy’s is taking back more than $600,000 in bonus compensation that had been “erroneously awarded” to unnamed executives.

Macy’s said it has already recovered some of the compensation in question, but around $350,000 remained to be clawed back as of April 1. The retailer added that during the 2025 fiscal year, it would seek to recover the remainder from the executives involved in accordance with its clawback policy.

Macy’s is far from the only company with these issues. Recently, others have been forced to claw back pay in a similar fashion thanks to accounting snags. Katapult Holdings, an eCommerce-focused company in the financial technology sector, revealed last year it had detected errors that triggered its compensation recoupment policy. NCR Voyix, a software, consulting and technology company, recovered erroneously awarded compensation related to a 2023 accounting restatement.

Historically, brand-name companies have come calling for clawbacks in the wake of scandals. For example, fast-food chain McDonald’s took former CEO Stephen Easterbrook to court in 2020 to get back some of his pay after learning he had conducted inappropriate relationships with company employees. In 2017, financial services company Wells Fargo revealed it planned to claw back $28 million in compensation from ex-chairman and CEO John G. Stumpf.

Now, it appears corporations are taking aim at slashing CEO pay packages before they even award the compensation. The CEO of beleaguered agricultural giant Archer-Daniels-Midland Co., Juan Luciano, saw his 2024 bonus cut by more than 50% in response to the discovery of accounting problems at the company. Meanwhile, Citigroup Inc. disclosed last month it significantly reduced awards given to executives as part of a program to promote better risk management and controls at the bank.

These latest developments come at a time when CEO compensation appears to be booming for the world’s largest companies. One analysis of a sample of 50 companies with revenues above $1 billion determined that bonuses skyrocketed last year for chief executives, even though standard performance metrics like growth in earnings per share and median revenues were falling. And new research from the University of Texas at Dallas suggests that such companies should be wary of further widening the chasm in compensation between their CEOs and employees. In such cases, the study indicated perceptions of unfairness eroded employees’ loyalty to their employers.

Corporate directors, pay attention.