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Compensation Committee Guide
The Compensation Committee Guide, Seventh
Edition, addresses all current issues pertaining to executive
officer compensation and the required fiduciary role of the compensation
committee.
Following is the Table of Contents of this unique manual.
| Section I: Current Compensation Committee Issues And Needed Responses | |
| Growing Governance Focus; Issues Confronting Compensation Committees; Mandated Proaction; Changes In Compensation Committee Practices; Some "Best Practices"; Planning Imperatives (Needed Committee Proaction); How To Reduce Or Control Liability Risk Exposure; Best Stock Option Grant Practices; Fundamental Function Of The Compensation Committee: The Validation Of Performance/Reward And Shareholder Return Linkages | |
Section II: Compensation Committee Role And Needed Procedural Process Protocol |
|
| Introduction; Fundamental Laws Governing The Compensation Committee; Fiduciary Duties Of Loyalty And Due Care; Legal Obligation/"Business Judgment Rule"; Function Of The Board Compensation Committee; NYSE Requirement; Corporate Bylaw Example; National Association Of Corporate Directors’ ("NACD’s") Findings; Illustrative Board/Committee Structure; What And Who Influences The Board And Its Committees?; Illustrative Board Approval For Compensation Committee Charter; Illustrative Compensation Committee Action Steps; The Compensation Committee Chair; Compensation Committee Oversight And Regulatory Compliance Checklist; Procedural Process Protocol; Linkage With Company Strategy; Review Of Executive Contracts | |
Section III: Executive Compensation Program Development/Review |
|
| Evolutionary Forces; Executive Compensation Package Elements; Governance Process Linkage/Strategic Performance Compensation Validation; Pay Positioning Strategy; Linking Pay And Comparative Performance: Benchmarking/Indexing; Executive Compensation Philosophy; Base Salary Determination; Annual Incentives; Corporate Versus Unit Incentives; Trends And Developments In Long-Term Incentives; Summary Of Key Practice Trends; Long-Term Incentive Planning; Share Ownership Guidelines; Private Company Issues; Nonqualified Deferred Compensation; Expert/Advisor Reliance; Expert Selection Criteria; General Differences Among Different Types Of Executive Compensation "Experts" | |
Section IV: Performance Assessment |
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| Creating Shareholder Value; Traditional Performance Measures; Conventional Accounting Pitfalls; Capital Utilization: Return On Capital Versus Cost Of Capital; Use Of Combination Growth/Return Measures; Other Approaches; Traditional Financial Performance Measure Comparisons; EBITDA: Earnings Before Interest, Taxes, Depreciation, And Amortization; Generating The Executive Incentive Fund; Annual Performance Incentive Plan; Considerations In Selecting Performance Measures For Long-Term Incentives | |
Section V: Non-Employee Director Compensation |
|
| Evolutionary Events; Common Corporate Bylaw; Director Total Remuneration Package; The Reasonableness Or "Fairness" Standard; The Sarbanes-Oxley ("SOX") Effect; How And Why Should Outside Directors Be Paid?; Typical Director Compensation Evolution (At Various Business Stages); Director Liability Under The Securities Acts; Inappropriate Use Of Surveys; National Association Of Corporate Directors ("NACD") 2007 Report Summary Results; Insider Trading Restrictions; Stock Ownership Guidelines; How To Assure Director Compensation Reasonableness; Required Minutes For Meetings Involving Discussion, Consideration, And Approval Of Director Compensation Changes; Length Of Treatment Of Subject In Minutes; Director Fee Elections; Board Assessment | |
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| Illustrative "Basic" Compensation Committee Charter (Publicly Held Company Example); Illustrative "Expanded" Organization And Compensation Committee Charter (Publicly Held Company Example); Illustrative Charter For Board Compensation Committee (Private Company Example) | |
Appendix B: Board/Committee Checklists |
|
| Illustrative Board And Committee Authorization Checklist; Illustrative Compensation Committee Meeting Checklist | |
Appendix C: Compensation Committee Evaluation Forms |
|
| Compensation Committee Evaluation: Example A; Compensation Committee Evaluation: Example B | |
Appendix D: Executive Compensation Primer |
|
| Development Of American Executive Compensation Practices; Compensation Categories And Elements; Generic Executive Pay Models; A Target Direct Pay Structure; Executive Annual Incentive Plan Process; Alternative Executive Annual Incentive Pool Funding Formulae Illustrations; Some Types Of Common Long-Term Incentive ("LTI") Plans; Comparative Analysis Of Some LTI Techniques; Key Features Of "Omnibus" Or "Universal" Stock Plans (Compared To "Plain Vanilla" Stock Option Plans); Comparison Of Restricted Stock Awards ("RSAs") And Restricted Stock Units ("RSUs"); Stock Option Valuation (Under The Black-Scholes Model); Nonqualified Deferred Compensation | |
Appendix E: Executive Compensation Tally Sheets |
|
| Executive Compensation Tally Sheet (Illustration); Illustrated Tally Sheet For The CEO; Illustrated Tally Sheet For The COO; Illustrated Tally Sheet For The CFO; The Goldman Sachs Group, Inc., Tally Sheet | |
Appendix F: Shareholders’ Questions |
|
| PriceWaterhouseCoopers LLP Publication: Shareholders’ Questions — 2007 (Part C. Executive Compensation) | |
Appendix G: Institutional Shareholder Services (“ISS”) U.S. Corporate Governance Policy: 2007 Updates |
|
Appendix H: CEO Performance Evaluation |
|
| CEO Performance Evaluation; The Prudential Insurance Company Of America Chief Executive Officer Evaluation Form | |
Appendix I: Director Compensation Primer |
|
| Director Compensation Elements; Director Compensation Table (Required By The SEC To Be Disclosed In The Proxy Statement To Shareholders); Hay Group 2007 Study On Director Compensation Increases; Council Of Institutional Investors ("CII"); Equilar, Inc., 2007 Survey Of Chair And Lead Director Pay Of Fortune 500 Companies | |
Appendix J: Selected Legal And Regulatory Requirements |
|
| Introduction; Executive Compensation Aspects Of The Sarbanes-Oxley Act Of 2002; Sarbanes-Oxley ("SOX"): Section 304; Insider Trading: Reporting Requirements/Disgorgement Of Profits; Revised Executive And Director Compensation Disclosures; Disclosure Of Equity Compensation Plan Information (Release Numbers 33-8048 And 34-45189); Stock Option Repricing Disclosure; SEC Regulation Fair Disclosure ("Reg. FD" Rules 10b5-1 And 10b5-2); Stock Exchange (NASDAQ/NYSE) Listing Requirements (Executive Summary); Reasonable Compensation: Legal Limits On (Tax Deductions For) Executive Pay; Pri vate Company Vulnerability; Internal Revenue Code Section 162(m); Incentive Stock Options ("ISOs"); Tax Treatment Of Nonqualified Deferred Compensation; Internal Revenue Code Section 409A; Internal Revenue Code Section 83; "Golden Parachutes"; IRS Guidance Provided Relating To Golden Parachutes; Disclosure Requirements; Accounting For Stock Options Background; FASB Interpretation No. 44; FAS 123 Accounting Rule ("Accounting For Stock-Based Compensation") | |
Appendix K: Selected Sector Regulations And Rules And Key Court Decisions |
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| Quotes From The Office Of Thrift Supervision Department Of The Treasury Regulatory Bulletin RB 27b; Tax-Exempt Rules And Developments; Important Landmark Cases
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