ABSTRACT
Malus is an arrangement that permits the institution to prevent vesting of all or part of the amount of a deferred remuneration award in relation to risk outcomes or performance. Clawback is a contractual arrangement whereby the staff member agrees to return ownership of an amount of remuneration to the institution under certain circumstances. This can be applied to both upfront and variable remuneration. The effective and meaningful use of ex-post risk adjustment, including malus, is absolutely necessary to align remuneration policy with risk-taking. There has been concern expressed that clawback may amount to an unenforceable penalty, at least to the extent that it depends on the individual being in breach of contract. In HMRC v Martin [2014] UKUT 0429 the Tribunal accepted the employee's argument that in the year of re-payment he was permitted to reduce the level of his taxable remuneration by the amount he had re-paid.
