Addressing the Challenges of Expanding Board and Committee Agendas

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.

Board agendas continue to evolve and expand in response to emerging issues and fast-moving risk areas—from cybersecurity to heightened global political and economic volatility. Increased attention to corporate culture and environmental and social matters is also adding to boards’ workloads.

In October 2018, NACD, KPMG, Heidrick and Struggles, and Sidley Austin convened a meeting of Fortune 500 company audit committee and nominating and governance committee chairs; the group explored how boards are addressing evolving oversight responsibilities and the impact on committee structures. The discussion resulted in key insights around using ad hoc committees, ensuring that the board’s processes and skills are fit for purpose, and communicating board effectiveness to investors.