Clawback

A clawback is a contractual provision requiring an employee to return compensation under certain conditions: early departure, misconduct, financial restatements, or termination for cause.

Clawbacks are standard in executive compensation and increasingly common in sign-on and retention bonus agreements. A typical clause: leave within 12 months, repay 100%. Within 24 months, repay 50%.

For equity, clawbacks might require returning shares or gains if an employee is terminated for cause or violates non-compete agreements. Always read clawback provisions carefully before accepting any bonus or equity grant.