Administrative agencies have long proceeded on the assumption that individuals respond to regulations in ways that are consistent with traditional rational-actor theory, but that is beginning to change.
In this Response to Clawbacks: Prospective Contract Measures in an Era of Execessive Executive Compensation and Ponzi Schemes, Professor Macchiarola challenges the doctrine of clawbacks proposed by Professors Cherry and Wong. Professor Macchiarola argues that the latent subjectivity of the clawback doctrine limits its efficacy and also outlines additional practical difficulties to implementing clawbacks. Professor Macchiarola concludes arguing that clawbacks are not necessarily a solution but could rather add another layer of cost and complexity in the form of uncertainty, unpredictability, and discontinuity.
In this Reply, Professors Cherry and Wong respond to Professor Macchiarola. Professors Cherry and Wong address three aspects of Professor Macchiarola’s Response: its application of the clawback doctrine to the recoupment of executive compensation; the criticism that the clawbacks doctrine introduces latent subjectivity into the analysis; and the apparent operational difficulties in implementing clawbacks.