The evolving compensation committee agenda

Compensation committees are playing a greater role in the oversight of a broad range of human capital management issues—from pay equity and talent development and retention to helping ensure that incentives throughout the organization drive long-term value creation.

In today’s challenging environment—including the critical workforce issues posed by the COVID-19 situation— board oversight of decisions related to the company’s workforce are taking on even greater importance. To that end, investors are looking for compensation committees to increase oversight and disclosure of the alignment of compensation incentives with long-term value creation and human capital management issues such as workplace safety, employee diversity, and corporate culture. With that backdrop, the following considerations may be helpful for compensation committees as they broaden their focus and evolve their agendas.

• Consider expanding the committee’s remit to include human capital management in addition to traditional compensation matters.
• Review the committee title and charter against its current oversight activities and consider whether any changes are necessary.
• Consider whether to incorporate nonfinancial or sustainability metrics into executive compensation plans.
• View shareholder proposals on compensation issues as a bellwether.
• Be mindful of changes to proxy advisors’ assessments of executive compensation policies.
• Help ensure that long-term incentives are clearly aligned with sustainable long-term value creation.
• Expect greater scrutiny of director pay by proxy advisors and investors.
• Leverage disclosures and shareholder engagements to tell the company’s compensation story and address investor concerns.

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