What is the Role of a Compensation Committee?

Q: What Is The Role of A Compensation Committee?
 
A: The typical compensation committee consists of non-employee members of the Board of Directors, who are considered disinterested parties since they do not benefit from any compensation decisions made be the committee.  Compensation Committees generally perform the following duties and responsibilities.
 
·        Approve level of executive pay and benefits consistent with performance (both company and individual) and the company’s strategy.
·        Approve executive pay and benefit programs.
·        Review executive and non-executive pay and benefits policy and program design strategy.
·        Prepare the Compensation Committee report for the proxy statement (publicly-traded companies).
·        Approve individual grants of stocks and/or other equity awards, including the number of shares, the price per share, the award period and other similar design issues relevant toward stock and award plans.
 
By fulfilling these responsibilities, members of the Compensation Committee ensure the appropriateness of executive pay and guarantee that the executive compensation programs attract, retain and motivate top-flight executives.