What are some basic guidelines for compensation?
The NACD Blue Ribbon Commission on Executive Compensation, convened in 2003, identified a set of core principles as “appropriate for every publicly traded American corporation and for most non-public companies as well.” Principle 1: Independence Ensure that compensation committee membership, processes, and approach are entirely independent from the CEO and management. Principle 2: Fairness Try to create pay packages that will pass the test of scrutiny for fairness both internally and externally. Principle 3: Link to Performance Link pay to desired outcomes that the individual can affect rather than to stock price alone. Principle 4: Long-term Value for Shareholders Compensation committees should focus primarily on awards for achieving key metrics over an extended period of time, including long-term stock ownership by management. Principle 5: Transparency Strive for plans that can be easily understood by all interested parties and disclosed without embarrassment. Compensation committee
