The Current State of Boardroom Inclusion



Board diversity is not enough. In recent years, social, investor, and regulatory pressures have led many directors, and their boards, to reconsider their composition and the criteria used to identify and select potential board members. The aim is to make boards more diverse, not only in the perspectives directors bring to the boardroom, but also in its gender, racial, and ethnic makeup. However, achieving board diversity alone is not enough. If turning diverse candidates into diverse directors is half the battle, the other half is ensuring that their diverse perspectives and backgrounds are “activated” and heard in the boardroom.

The focus on the board’s compensation committee has never been sharper. The components of compensation plans and the link between compensation and company performance are under intense scrutiny from shareholders, employees, policymakers, the media, and other stakeholders. The Report of the NACD Blue Ribbon Commission on the Compensation Committee revisits NACD’s 2003 Report of the NACD Blue Ribbon Commission on Executive Compensation to highlight the new environment in which compensation committees—and, more broadly, boards—are now operating. It recommends that the compensation committee and board work together to establish an executive compensation philosophy that supports the company in creating long-term, sustainable value.

The report includes ten specific recommendations for compensation committees to consider when evaluating their compensation philosophies. It also provides practical tools, such as sample compensation committee charters, a compensation committee assessment, and guidance on executive employment contracts.