Audit and Compensation Committee Chair Advisory Councils

As the debate over the corporation's purpose continues, some people have lined up behind the 2019 Business Roundtable Statement on the Purpose of a Corporation, and others behind shareholder primacy. The evolution of environmental, social, and governance (ESG) issues into metrics often highlights this schism, with institutional shareholders gaining better insight into companies’ ESG practices.

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.