NACD Library

Board Oversight of Executive Pay: Compensation Committee Basics

Board Oversight of Executive Pay: Compensation Committee Basics Cover
Series: Director Essentials
Publication Date: January 30, 2018
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In brief: Compensation committee members are tasked with designing compensation programs for senior management in a way that links pay with performance, attracts and retains executives, aligns executives’ goals with the company’s long-term strategy, and avoids unnecessary risk-taking. Designing such pay programs requires a firm understanding of compensation committees’ fiduciary duties, along with the basics of setting executive pay.

This Director Essentials guide—co-produced by Mercer and NACD—answers questions such as:

  • How do you develop an executive compensation philosophy that supports the company’s business strategy?
  • What are the basic components and the mix of pay elements that are needed to support the pay philosophy?
  • How do we evaluate whether certain incentive plans are aligned with the company’s pay philosophy?
  • What role does the compensation committee play in engaging with shareholders?
  • How have the risks associated with compensation committee membership changed in recent years? 

Most relevant audiences: Public company directors; chairs of the compensation and nominating and governance committees, compensation committee members, new directors