Sample Compensation Committee Charters

In brief: These sample compensation committee charters originally appeared in the Report of the NACD Blue Ribbon Commission on the Compensation Committee. The charters are geared toward compensation and management development committees, and include the committee purpose, organization, and authority and responsibilities.

This resource can help your board:

• Create or update the compensation committee charter in line with Dodd-Frank and stock exchange listing requirements.

• Review the committee's overall goals and its role in talent development.

Most relevant audiences: compensation committee members, general counsels

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.