The role of the compensation committee is to set appropriate and supportable pay programs that are in the organization’s best interests and aligned with its business mission and strategy.
With the adoption of the executive and director compensation disclosure rules by the SEC, changes to the accounting for certain equity awards, and more active shareholder groups wanting a “say on pay,” the compensation committee is working harder to meet the requirements of all observing parties. A number of constituents, including investors, analysts, the media, government, and governance rating agencies are now shining a spotlight on compensation committees.
Key Responsibilities of Compensation Committees
The SEC, the NYSE, and the NASDAQ require a compensation committee of a public company to assume a number of responsibilities which may include:
- Establish CEO and executive officer compensation
- Develop the compensation philosophy
- Assist with and review the Compensation Discussion and Analysis
- Complete the Compensation Committee report
- Oversee equity compensation grant policy
- Retain and terminate outside experts
- Evaluate shareholder proposals related to executive remuneration