Mitigate financial risk
Posted: Sat May 24, 2025 10:48 am
The primary function of a clawback clause is to protect an organization from financial losses that will impede its growth. This provision is particularly critical for companies that sell SaaS products.
For example, if a customer cancels their subscription shortly after signing up, the vendor doesn’t earn much from the deal in the long term. But, the sales rep who initially closed the deal might’ve received a substantial commission payment. Without the proper provisions in place, customer churn doesn’t impact the sales rep, but does result in a loss for the business, which still had to pay commission on a deal that didn’t stick.
A clawback clause prevents this scenario by enabling the business to afghanistan phone number list reclaim commission payouts that stem from a deal they deem as unfulfilled.
Provide legal protection against fraud or misconduct
While no company wants to believe their employees might engage in fraudulent behavior, clawback clauses protect the business in the rare event of misconduct. They give the business legal grounds to reclaim payment from deals made under false pretenses, or ones that violate company policies or compliance laws.
For example, if a customer cancels their subscription shortly after signing up, the vendor doesn’t earn much from the deal in the long term. But, the sales rep who initially closed the deal might’ve received a substantial commission payment. Without the proper provisions in place, customer churn doesn’t impact the sales rep, but does result in a loss for the business, which still had to pay commission on a deal that didn’t stick.
A clawback clause prevents this scenario by enabling the business to afghanistan phone number list reclaim commission payouts that stem from a deal they deem as unfulfilled.
Provide legal protection against fraud or misconduct
While no company wants to believe their employees might engage in fraudulent behavior, clawback clauses protect the business in the rare event of misconduct. They give the business legal grounds to reclaim payment from deals made under false pretenses, or ones that violate company policies or compliance laws.