The Compensation Committee Handbook

TheThird Edition of theCompensation Committee Handbook provides a comprehensive review of the issues facing compensation committees. It covers functional issues such as organizing, planning, and best practice tips as well as compliance advice on the implications of Sarbanes-Oxley and other regulations. New developments covered in the third edition include coverage of new SEC disclosure requirements for compensation committees, new GAAP rules on expensing of stock options and other stock based compensation, and new IRS regulations on stock-based compensation.

James F. Reda is President of James F. Reda and Associates. Mr. Reda has over fifteen years of executive compensation consulting experience and has written and presented extensively on the subject.

Stewart Reifler is a partner at the New York office of Vedder, Price, Kaufman & Kammholz and head of their executive compensation practice. Mr. Reifler negotiates and structures executive employment, executive severance and retirement, and executive compensation arrangements on behalf of both executives and companies.

Laura G. Thatcher is head of Alston & Bird's executive compensation practice. Ms. Thatcher serves on the Editorial Board of the Journal of Deferred Compensation and chairs the compensation committee of two companies.

Foreword	p. xi
Preface	p. xv
Acknowledgments	p. xvii
About the Authors	p. xix
The Modern Compensation Committee	p. 1
The Compensation Committee	p. 3
Board Structure: The Focus on Independence	p. 4
Compensation Committee Composition and Multiple Independence Requirements	p. 4
Compensation Committee Size	p. 9
Compensation Committee Charter	p. 10
Role of the Compensation Committee	p. 12
Role of the Compensation Committee Chair	p. 14
Duties and Responsibilities of the Compensation Committee	p. 14
Six Precepts for Responsible Committee Performance	p. 15
Compensation Benchmarking	p. 24
The Importance of Compensation Committee Meeting Minutes	p. 27
Call to Action	p. 29
Selecting and Training Compensation Committee Members	p. 30
The Role of the Nominating Committee	p. 30
Nomination and Selection of New Compensation Committee Members	p. 31
Time Commitment	p. 35
Diversity	p. 36
Attracting Candidates	p. 36
Conducting the Search	p. 37
How to Approach Candidates	p. 38
CEO Involvement in the Selection Process	p. 39
Making the Final Selection	p. 39
How to Say No	p. 42
What If the New Director Does Not Work Out?	p. 42
Benefits of an Educated Board	p. 43
Orientation of New Members	p. 43
Ongoing Training	p. 46
Outside Experts and Advisors	p. 47
CEO Succession and Evaluation	p. 51
Succession Planning	p. 51
CEO Evaluation	p. 52
Director Compensation	p. 72
Overview	p. 72
Elements of Director Compensation	p. 73
Disclosure	p. 77
Trends in Director Compensation	p. 80
Conducting a Director Compensation Study	p. 82
Legal and Regulatory Framework	p. 87
Corporate Governance	p. 89
Fiduciary Duties of Directors	p. 89
Practical Applications of Fiduciary Duty Rules for the Compensation Committee in Specific Contexts	p. 97
Self-Regulatory Organization Corporate Governance Rules and "Best Practice" Recommendations	p. 103
Disclosure of Executive and Director Compensation	p. 112
Background	p. 112
Compensation Discussion and Analysis	p. 113
Grants of Plan-Based Awards Table	p. 118
Equity Holdings	p. 119
Retirement and Postemployment Payments and Benefits	p. 120
Option Grant Practices	p. 122
Director Compensation	p. 123
Corporate Governance and Independence of Directors	p. 126
Disclosure of Equity Compensation Plans	p. 130
Selected Provisions Regulation S-K	p. 133
Other Securities Issues	p. 135
Special Rules Affecting Insider Trading	p. 135
NYSE/NASDAQ Rules: Approval of Equity Compensation Plans	p. 148
Selected Sarbanes-Oxley Provisions Relating to Executive Compensation	p. 152
Tax Rules and Issues	p. 158
Overview	p. 158
Organizations Responsible for Federal Tax	p. 159
Major U.S. Tax Law and Issues	p. 160
Deferred Compensation	p. 160
IRC Section 162(m): The $1 Million Cap on Executive Compensation	p. 186
IRC Section 280G and 4999: Golden Parachutes	p. 191
IRC Section 83: Taxation of Property transferred in connection with the Performance of Services	p. 195
Other Relevant Tax Code Sections	p. 196
Accounting Rules and Issues	p. 205
Overview	p. 205
Organizations Responsible for Accounting Standards (Past and Present)	p. 206
New Equity-Based Compensation Accounting Rules	p. 207
Old Equity-Based Compensation Accounting Rules	p. 224
Accounting Standards that Compensation Committee Members May Need to Know	p. 227
ERISA and Labor Law, Rules, and Issues	p. 244
ERISA Law and Regulations	p. 244
Labor Laws and Regulations	p. 248
ADEA Law	p. 248
Practical Applications	p. 253
Executive Employment, Severance, and Change-in-Control Arrangements	p. 255
Background	p. 255
At-Will Employment Arrangements	p. 256
Contractual Employment Arrangements	p. 257
Fundamental Elements of a Written Employment Arrangement	p. 258
Process	p. 259
Types of Employment Arrangements	p. 261
Terms and Conditions Contained in Employment Arrangements	p. 263
Incentive Compensation	p. 284
Useful Definitions	p. 284
Cash versus Equity	p. 287
Typical Plan Features and Designs	p. 288
Shareholder Approval Requirements	p. 297
Retention-Only Plans	p. 297
Equity-Based Compensation	p. 299
Equity-Based Incentive Awards	p. 299
Stock Ownership and Retention Guidelines	p. 315
Executive Pension-Benefit, Welfare-Benefit, and Perquisite Programs	p. 317
List of Progams	p. 317
Pension-Benefit Arrangements	p. 318
Welfare-Benefit Arrangements	p. 325
Perquisites	p. 328
Special Issues	p. 333
Option Grant Practices	p. 333
Repricing Stock Options	p. 340
"Going Dark"	p. 346
Epilogue	p. 348
Looking Ahead	p. 348
The Next Executive Compensation Controversy	p. 352
Selected Resources
Selected SEC Rules, Regulations, Schedules, and Forms	p. 354
List of Organizations and Periodicals	p. 422
List of Directors Colleges and Other Training Opportunities	p. 429
Annotated Form and Samples of Compensation Committee Charters	p. 434
Sample Compensation Discussion, and Analysis (CD&A)	p. 449
Glossary	p. 475
Bibliography	p. 516
Index	p. 527
Table of Contents provided by Ingram. All Rights Reserved.

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The Compensation Committee Handbook

Summary

Author Biography

Table of Contents

Supplemental Materials