Compensation Discussion and Analysis Template

CFA Institute, in partnership with the CD&A working group, offers this CD&A template as a first step toward making compensation communications clearer and more relevant to investors. To achieve these goals, the working group members agreed that the template should help issuers produce a CD&A that, like any useful communications document, tells a story. In this case, the story concerns a company's compensation policies, practices, and decisions. Members of the working group also agreed that the template should guide issuers in creating a document that can be read and understood by average retail investors. Indeed, after reading the CD&A, investors should be able to understand, retain, and effectively apply such information when making investment decisions or casting "say-on-pay" proxy votes.

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.