The Advisors' Blog

– Broc Romanek

Here’s the teaser for this memo by Pay Governance’s John England:

To qualify for the performance-based compensation exception under Section 162(m), payment of the compensation must meet several requirements, including that performance goals must be set by the corporation’s “compensation committee.” The Code defines “compensation committee” as the committee of independent directors that has the authority to establish and administer the applicable performance goals, and certify that the performance goals are met.

Since the name for the subset of the independent members of the board with responsibility for executive compensation doesn’t matter for deductibility, we wondered whether the compensation committee name implies anything about duties and responsibilities, and whether there are any corporate governance implications regarding the board’s oversight of broader human resources issues beyond executive compensation?