August 7, 2017

The lack of objectivity on clawbacks also “makes the board vulnerable to alternative interpretations of how that concept is being executed,” he says. “That puts the relationship of the board with its stakeholders, including litigants and activists, at risk.”

“The party being punished needs to understand clearly and objectively what the punishment is if punishment is going to have a deterrent effect,” he says. Since there is no automatic trigger for a clawback as the law stands now, he argues, the line between bad behavior and acceptable behavior is blurred.

According to Nir Kossovsky, CEO of Steel City Re, a company that insures executives and board directors against reputation issues based on proprietary risk metrics, clawbacks are ineffective as a deterrent to bad behavior because there is so much discretion involved.

August 7, 2017
Agenda Week

“Clawbacks are ineffective as a deterrent to bad behavior because…much discretion (is) involved.”

Reputation risk management: mitigating both disappointment and noxious media.

Reputations are valuable strategic intangible assets. Threats to these assets⏤ enterprise reputation risks, often mislabeled “brand risks” ⏤ need to be managed, and management needs to be overseen through reputation risk governance lest reputational damage or reputational harm result in long-tailed go-forward losses in economic value and/or political power. Because these intangible risks arise from the interplay of stakeholder expectation, experiences, and media amplification, parametric insurances for intangible asset risks, for reputational value, for reputational harm, and for reputation assurance help mitigate risk by telling a simple, convincing and completely credible story of quality reputation governance to stakeholders. This story telling effect is the expressive power of insurance complementing insurance’s better known instrumental power of indemnification.

Risk management, risk financing in insurance captives, and risk transfer through reputation insurances comprise the constituent elements of a comprehensive solution. What’s your strategy?