Bank Compensation Corner: September Insights

Compensation Insights

Welcome to the September edition of Bank Compensation Corner. Here, we deliver focused, timely insights to help banks navigate today’s complex compensation landscape. This month’s spotlight includes tax impacts from the “One Big Beautiful Bill,” a key court ruling on equity award forfeitures tied to non-competes, and what clawback provisions reveal to investors about pay design—critical updates for compensation committees and bank leadership.

1. Equity Awards Compensation Insights: Tax Impacts from the One Big Beautiful Bill

The “One Big Beautiful Bill” (OBBB) introduces sweeping compensation-related tax changes poised to affect bank equity-award programs. Employers should monitor updates around deductibility of executive pay, modifications to deferral rules, and potential direct or indirect impacts on the timing of equity recognition.

2. Non-Competes & Equity Forfeiture: Tenth Circuit Ruling

A recent Tenth Circuit decision has held that forfeiture of equity awards for breach of competition covenants may be treated differently than traditional non-compete enforcement, potentially altering how compensation agreements are structured. Banks would be wise to revisit forfeiture language in equity documents to ensure clarity and enforceability.

3. What Clawbacks Tell Investors About Pay Design

Clawback provisions serve as a critical governance signal to investors—demonstrating an organization’s commitment to accountability. As regulators and proxy advisors increasingly flag deficiencies in clawback scope and clarity, banks should ensure policies are comprehensive (covering both performance- and time-based awards), clearly drafted, and consistently applied.

Key Takeaways

Area	Action Item
Equity Tax Strategy	Review OBBB provisions and model tax impact on equity plans; evaluate whether structural adjustments or disclosures are needed.
Forfeiture & Restrictive Covenants	Audit equity plan covenants and forfeiture clauses to confirm enforceability—even post-departure events.
Clawback Policy	Ensure clawback scope aligns with market best practices and proxy-advisor expectations (e.g., Glass Lewis), applies to all incentive awards.

By proactively aligning these components, banks can reinforce compensation integrity, preserve key relationships, and maintain investor confidence in a changing regulatory environment. Stay up to date with the bank compensation corner for your monthly compensation insights.