Clawbacks

Hi all,

My firm has stated they will clawback any gross payments (bonus, sign-on etc) in the 12-months prior to a resignation if I were to resign within a set number of years after my start date. Does anyone have any knowledge of how strictly firms enforce clawbacks? If I were to resign, how are they expecting people to pay back gross sums when we get less than half of it?

This post isn't restrictive to PE so happy for all others to chime in with their experience. 

Thanks!

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Comments (11)

Sep 14, 2021 - 8:01am

I haven't come across this type of clawback.

If you wanted to push back then most PE fund managers allow a clawback in the LPA but the clawback is always post tax. Escrow concepts help give LPs some comfort that the GP carry clawback can actually be applied. 

So not sure how the company you are speaking to expect to a) clawback and b) clawback a gross sum. 

  • Principal in PE - Other
Sep 14, 2021 - 9:32am

He is referring to compensation clawbacks of his salary and bonus, not LP clawbacks from GPs taking carry or fees.

The OPs clawback contract is very aggressive. I've never seen it extend to a year, it's usually 3-6 months and doesn't roll like that. I'd try and move elsewhere tbh.

  • Teller in PE - Other
Sep 14, 2021 - 10:15am

He is referring to compensation clawbacks of his salary and bonus, not LP clawbacks from GPs taking carry or fees.

The OPs clawback contract is very aggressive. I've never seen it extend to a year, it's usually 3-6 months and doesn't roll like that. I'd try and move elsewhere tbh.

Agreed seems extremely aggressive. At the very least you should try to push back and have the claw back net of tax as else you're on the hook to work for free for a year if you ever decide to leave (e.g. if your bonus is 100% of base and you have to pay it back using post-tax earnings).

  • Analyst 1 in PE - LBOs
Sep 14, 2021 - 2:13pm

Hi All,

Thanks for the feedback. This contact is from one of the MF PE firms analyst programs so I feel I have little/no leverage here. For anonymitys sake I won't disclose which fund it is but its something I am worried about. 

The period over which this is enforceable is >2 years, meaning that if I resign at 23 months I'd be liable to pay back any bonuses from my 11th month there to the 23rd month. Just given how situations can change I see this as quite dangerous as I'd receive less than half the actual gross bonus and paying back the gross amount would be practically impossible. 

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  • Analyst 1 in PE - LBOs
Sep 14, 2021 - 5:32pm

Yes, the majority of the current team started as Analysts and worked their way up. It's just a matter of finding someone I feel comfortable sharing this concern with. I don't want them to get the wrong impression. 

My hope was to start investing any bonus money I get ASAP but I think your suggestion is smart. 

  • Intern in IB - Gen
Sep 15, 2021 - 5:09am

In the same boat (Grad programme at a MF, 12-month clawback for 3 years). Speaking with some of the analysts at the firm, most of the places they were interviewing with were willing to pay for it so they could jump ship before the 3 years.

  • Analyst 1 in PE - LBOs
Sep 15, 2021 - 5:13am

We might actually be at the same place. That's good to hear regarding future employers. I don't have an inclination to leave anytime soon but wanted to know how that would play out. 

  • Analyst 1 in PE - LBOs
Sep 15, 2021 - 4:45am

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