NACD Blue Ribbon Commission Report on the Board and Long-Term Value Creation

Leaders in all organizations face short-term pressures ranging from economic conditions to competitor activities to demands from shareholders and stakeholders.  It can be challenging for management teams—and board members—to set aside immediate needs and concerns in the interest of long-term goals that might seem distant and abstract.

The Report of the NACD Commission on the Board and Long-Term Value Creation emphasizes that directors have a fundamental responsibility to ensure that the organization’s short-term actions are well-aligned with its long-term strategy.  It focuses on the specific levers the board has to encourage this alignment, and includes specific recommendations, suggested action steps, and boardroom tools.

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.