The Compensation Committee Handbook, Fourth Editio n

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