Board Oversight of Gender Pay Equity

In brief: Corporate leaders increasingly recognize the importance of gender pay equity to business competitiveness, as they are confronted with the reality that failing to reward employees equitably may lead to the loss of the best and brightest talent. For directors and executives alike, the stakes are high—especially given that pay equity is often viewed as a signal of a company’s commitment to diversity and inclusion. This tool offers guidance for boards and management to better understand this issue and reduce potential risks presented by unequal compensation.

This resource can help your board to

• initiate boardroom discussions around oversight of gender pay equity issues,

• monitor management’s progress on pay equity initiatives, and

• communicate to a broad set of stakeholders their company’s commitment to gender pay equity.

Most relevant audiences: public company directors, board chairs, lead directors, compensation committee chairs, compensation committee members

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.