Anatomy of a Clawback
A clawback is a promise with a repayment schedule attached to its failure. The engineering question is not whether one exists — most modern agreements include something called a clawback — but whether it has teeth that reach the company's assets or only teeth painted on the page. I judge a clawback on three axes: does the trigger fire on a measurable, non-gameable event; does the amount owed scale to the size of the miss rather than collapsing to zero or all-or-nothing; and can the government actually collect without begging a court. Fail any one and you have a decorative clawback, which is worse than none, because it launders a weak deal in the language of a strong one.
Knowledge check
What are the three axes Gil uses to judge whether a clawback has real teeth?
Show the answer
Whether the trigger fires on a measurable, non-gameable event; whether the recapture amount is prorated to the size of the shortfall rather than being all-or-nothing or zero; and whether the government can actually collect the money through a secured mechanism rather than only through litigation.