Clawbacks have been in the news for much of the last year.

But UBS kicked the discussion into a higher gear when it announced that it would be clawing back some bonuses paid for work in 2010. The twist with the UBS clawbacks is that they are being triggered not by ethical lapses or fraudulent conduct but by P&L issues. Shares awarded a year ago for work rendered in 2010 were scheduled to vest over three years. But a clawback provision allows for up to half the award to be rescinded if the employee’s unit were no longer profitable.

Many trading units were unprofitable in 2011 at UBS, which prompted management to rescind the maximum amount from 2010 awards. That’s harsh, to be sure. And rare. I do not think we’ll be seeing similar moves from U.S. investment banks, though there are some obvious merits to such terms.

Goldman Sachs and Morgan Stanley recently clarified their clawback provisions, making clear that the provisions extend to managers of employees asked to forfeit previously awarded compensation. That represents an expansion of the clawbacks’ reach, but the focus is still on fraud. Neither bank indicated that profitability of legitimate operations will be enough to trigger clawbacks. Regulators are weighing all of this and may issue some guidelines soon.

For more:
- here’s an article from TheStreet.com, suggesting clawbacks will not likely become more common

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Clawback of WaMu exec funds seems unlikely