A Compensation Committee Checklist
The Compensation Committee is appointed by and serves in an advisory role to a company’s Board of Directors. It makes the important final decisions on many executive compensation matters, including the types and particulars of the pay plans themselves, the amount of compensation, and even the performance measures and specific targets upon which the executives will be judged for purposes of calculating incentive awards. The following are the primary duties and responsibilities typically assigned to the Compensation Committee by the Board:
Develop the compensation philosophy for the company and ensure that it is consistent with the company’s business strategy, mission and culture.
Approve any compensation plans in which Officers and Directors are eligible to participate, subject to the review of the full Board and shareholders, as appropriate.
Recommend, provide oversight and approve awards of stock options and other equity, perquisites and other benefits, and employment and change of control contracts, subject to Board and shareholder approval, as required.
Act as liaison between the CEO and Board on all compensation and human resource issues.
Recommend and/or approve the CEO’s compensation to the Board, as well as the compensation for his/her direct reports as a whole.
Recommend the compensation package for Board members, subject to approval by the entire Board.
Recommend performance criteria and specific annual and long-term performance targets for salary increases and/or awards under the various executive compensation programs.
Review company’s performance in relationship to established targets and to peers, as appropriate.
Approve the company’s overall compensation budget and plan concepts. However, it is inappropriate for the Compensation Committee to become involved with the specifics of compensation design or planning covering non-officer personnel, unless they carry over from the executive plans, or require Board or shareholder approval.
The Committee can and must provide the meaningful oversight within the organization, by providing a “check and balance” on compensation matters, to ensure that the compensation paid is competitive and appropriate given the level of performance attained, and that such plans are consistent with the organization’s strategy and business plan.
The Committee must also provide the transparency required in today’s more open and highly legislated business environment; furthermore, it must ensure that compensation matters are conducted in a completely ethical and highly professional manner. Source: Compensation Resources Inc.
For more information, go to http://www.compensationresources.com, click on the Media/PR tab and go to Press Releases under “Articles & Publications.”
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