Regulatory Operations Deficient? Get Ready to Give Back Part of Salary, Say Companies

Posted 04 April 2013 | By

Regulatory affairs and compliance professionals could soon see themselves receiving a new scope of responsibility:  the compensation given to their corporate officers.

That's the conclusion of a new report published in the Wall Street Journal, which found that pharmaceutical and biotechnology companies are increasingly looking to revise their compensation policies to allow them to "claw back" compensation if an executive has violated ethics rules.

Those provisions are already being adopted by six of the largest drug makers in the US: Eli Lilly, Bristol-Myers Squibb, Johnson & Johnson, Amgen, Biogen-Idec and Merck.

"The drug makers are taking the trend a step farther by expanding their ability to subtract pay when things go wrong," write Joann Lublin and Jonathan Rockoff.

The practical effects of the changes could be far-reaching. If, for example, an executive is supposed to be managing a regulatory compliance program but fails to properly do so, he or she could be liable to return a portion of-or perhaps all-compensation, as well as vacate future bonuses or payouts.

Regulatory compliance concerns have been the cause of billions in payouts over the last few decades. Dozens of companies have settled charges with federal officials that include off-label promotion, hidden safety concerns, manipulated trials data and misleading federal regulators.

The move could represent a sort of internal "Park Doctrine," now used by federal regulatory officials to charge individuals with a crime if that person ought to have known about a violation. 

Still unresolved is how extensively the policy will permeate. While such measures now seem to be contained to the C-suite of executives, it could in theory one day extend to other layers of executives as well.

Read the entire Wall Street Journal piece here.


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