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Business LibreTexts

12.12: Payments to Directors and Officers

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  • Sarbanes-Oxley and subsequent SEC directives stipulate that

    • no public company may make a personal loan to a director or officer, and existing loans may not be materially modified or renewed;
    • the CEO and CFO of a public company that restates its financial statements as a result of misconduct will have to forfeit any bonuses, incentives, equity-based compensation, and profits on sales of company stock realized during the 12-month period following the first public issuance of the financial document or report containing the inaccurate financial statements;
    • the SEC has the authority to freeze any extraordinary payments by the company to any of its directors or officers while an investigation is ongoing;
    • the SEC can bar a person who has violated section 17(a) of the Securities Act of 1933 or section 10(b) of the Exchange Act from serving as a public company director or officer;
    • directors, officers, and 10% of stockholders of public companies are required to report changes in beneficial ownership within 2 business days after the relevant transaction;
    • directors and executive officers are prohibited from buying or selling equity securities during a blackout period;
    • nonmanagement directors are required to meet in regularly scheduled executive sessions without management present.