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This guide is intended to provide compensation committee members a better understanding of their role in overseeing executive pay and governance decisions for the company and its shareholders. The guide provides practical advice for compensation committee members on the following critical topics:
- What it means to be a committee member, including fiduciary duties and ongoing responsibilities
- How to work with outside advisors and ensure they are providing objective advice
- How to develop an executive compensation philosophy that supports the company’s business strategy
- What basic components and mix of pay elements are needed to support the pay philosophy
- How to evaluate whether incentive plans are consistent with the company’s pay philosophy
- How benchmarking pay to peer group companies can inform pay decisions
- How other benefits—such as severance, perquisites and nonqualified benefit plans — factor into the equation
- What role the committee plays in engaging with shareholders and their advisors
- How pay disclosure can be used to address shareholders’ pay and governance concerns
- How the risks associated with committee membership have changed in recent years
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