The Compensation Committee Handbook

Content: Foreword ix     Preface xiii     Acknowledgments xvii     About the Authors xix     PART One THE MODERN COMPENSATION COMMITTEE 1     CHAPTER 1 The Compensation Committee 3     Board Structure: The Focus on Independence 4     Compensation Committee Composition and     Multiple Independence Requirements 5     Compensation Committee Size 10     Compensation Committee Charter 11     Role of the Compensation Committee 13     Role of the Compensation Committee Chair 14     Duties and Responsibilities of the Compensation Committee 14     Compensation Benchmarking 26     The Importance of Compensation Committee Meeting Minutes 29     Call to Action 31     CHAPTER 2 Selecting and Training Compensation Committee Members 33     The Role of the Nominating Committee 33     Nomination and Selection of New Compensation Committee Members 34     Time Commitment 39     Diversity 40     Attracting Candidates 41     Conducting the Search 41     How to Approach Candidates 43     CEO Involvement in the Selection Process 43     Making the Final Selection 44     How to Say No 47     What if the New Director Does Not Work Out? 47     Benefits of an Educated Board 48     Orientation of New Members 49     Ongoing Training 51     Outside Experts and Advisors 53     CHAPTER 3 CEO Succession and Evaluation 59     The Relationship Between Pay and Succession Planning 61     The Advantages of Effective Succession Planning 65     The Succession Planning Process 67     CEO Evaluation 73     CHAPTER 4 Director Compensation 97     Overview 97     Elements of Director Compensation 99     Disclosure 103     Trends in Director Compensation 106     Conducting a Director Compensation Study 109     PART Two LEGAL AND REGULATORY FRAMEWORK 115     CHAPTER 5 Corporate Governance 117     Fiduciary Duties of Directors 117     Practical Applications of Fiduciary Duty Rules 126     Stock Exchange Corporate Governance Rules 131     External Compensation Policies and Guidelines 131     CHAPTER 6 Disclosure of Executive and Director Compensation 143     Background 143     Compensation Discussion and Analysis 144     The Tabular Disclosures 146     Option Grant Practices 154     Director Compensation 155     Disclosure of Material Compensation Risk 155     Compensation Disclosure Requirements for Smaller Reporting Companies 157     Golden Parachute Compensation 158     Pending Dodd-Frank Disclosure Requirements 160     Beneficial Ownership Reporting 162     Disclosure of Related Person Transactions 162     Director Independence and Governance Disclosure 163     Disclosure of Equity Compensation Plans 165     Plan Filing Requirements 167     Form 8-K 168     Selected Provisions of Regulation S-K 168     CHAPTER 7 Other Securities Issues 171     Selected Dodd-Frank Provisions Relating to     Executive Compensation 171     Special Rules Regarding Stock Transactions 175     NYSE/NASDAQ Rules: Approval of Equity     Compensation Plans 189     Selected Sarbanes-Oxley Provisions Relating to Executive Compensation 193     CHAPTER 8 Tax Rules and Issues 199     Overview 199     Organizations Responsible for Federal Tax 200     Major U.S. Tax Law and Issues 201     CHAPTER 9 Accounting Rules and Issues 255     Overview 255     Organizations Responsible for Accounting Standards (Past and Present) 256     New Equity-Based Compensation Accounting Rules 261     Previous Equity-Based Compensation Accounting Rules Under U.S. GAAP 280     Other Current and Past Accounting Standards 283     CHAPTER 10 ERISA and Labor Law, Rules, and Issues 305     ERISA Law and Regulations 305     Labor Laws and Regulations 309     ADEA Law 310     PART Three PRACTICAL APPLICATIONS 315     CHAPTER 11 Executive Employment, Severance, and Change-in-Control Arrangements 317     Background 317     At-Will Employment Arrangements 318     Contractual Employment Arrangements 319     Fundamental Elements of a Written Employment Arrangement 320     Process 322     Types of Employment Arrangements 323     Terms and Conditions Contained in Employment Arrangements 325     CHAPTER 12 Incentive Compensation 349     Useful Definitions and Abbreviations 349     Cash versus Equity 352     Typical Plan Features and Designs 353     Shareholder Approval Requirements 364     Retention-Only Plans 364     CHAPTER 13 Equity-Based Compensation 367     Equity-Based Incentive Awards 367     Stock Ownership and Retention Guidelines 384     CHAPTER 14 Executive Pension-Benefit, Welfare-Benefit, and Perquisite Programs 387     List of Programs 388     Pension-Benefit Arrangements 388     Welfare-Benefit Arrangements 397     Perquisites 400     APPENDIX A Selected SEC Rules, Regulations, Schedules, and Forms 405     APPENDIX B List of Organizations and Periodicals 511     APPENDIX C List of Director   s Colleges and Other Training Opportunities 519     APPENDIX D Sample Compensation Committee Charters 527     APPENDIX E Sample Compensation Discussion and Analysis (CD&A) 547     Glossary 633     Bibliography 685     Index 699