Primer on Climate Change: Directors’ Duties and Disclosure Obligations

In brief: The issue of climate change has evolved and now has serious implications for the duties of directors and officers as well as the potential for additional disclosure obligations for companies. This primer discusses climate change as a financial and systemic risk; it covers directors’ duties and disclosure obligations regarding climate change and current litigation around climate change, as well as providing recommendations that can help directors prepare their companies for the effects of climate change.

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.