Financial Oversight Under Varying Economic Conditions

This Director Essentials (DE) guides directors in the oversight of company financial performance through all types of economic conditions and cycles. As fiduciaries, directors are expected to oversee this area. 

As such, US stock market authorities require board members to possess “financial literacy,” with Nasdaq defining it as the “ability to read and understand financial statements” and the New York Stock Exchange leaving the definition to boards.

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.