Exploring the factors adopted in malus and clawback provisions

Abstract

The global financial crisis of 2008 has triggered attention on the relationship between pay and performance at executive level, exposing risk-taking behaviour and reduced shareholder trust. Under this context malus and clawback was developed to provide recourse, withhold or recover remuneration, to drive pay aligned to performance and ethics. This paper aims to explore how malus and clawback provisions are designed and implemented to ensure accountability and fairness in executive remuneration. The study rationale is to better understand the context which adds or detracts from making malus and clawback deliver on its intent. That understanding is delivered through exploring and analysing remuneration frameworks, legal and contractual structures, and procedural fairness in applying malus and clawback. The paper employed an interpretivist, qualitative approach to understand from participants lived experiences. The phenomenological study was conducted through 13 semi-structured interviews with experts possessing about 10 years of experience. The data was analysed thematically by identifying recurring patterns. The study revealed three interrelated dimensions. First, definitional clarity and distinctions of triggers; second, coherent legal and contractual structures that secure enforceability; and third relates to procedural fairness that fosters legitimacy and trust. When integrated within broader governance systems, these provisions shift beyond compliance to strengthen ethical accountability and stakeholder confidence. Boards and remuneration committees should incorporate malus and clawback clauses within broader governance systems that balance deterrence with fairness. Policymakers and regulators are encouraged to promote disclosure consistency and procedural guidance to ensure equitable enforcement. The study contributes to the body of knowledge around fair and responsible application of malus and clawback in executive remuneration delivered through a hybrid governance perspective that reconciles agency-based control with stewardship-based trust.