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Spotlight on Governance Web Conference Series: Director Compensation Issues
November 10, 2009
Welcome to the
How to Submit your Question
Step 2: Click on the Send button. Step 1: Type in your question here.
Welcome to the Spotlight on Governance Web Conference Series: - - PDF document
Welcome to the Spotlight on Governance Web Conference Series: - - PDF document
Welcome to the Spotlight on Governance Web Conference Series: Director Compensation Issues November 10, 2009 How to Submit your Question Step 1: Type in your question here. Step 2: Click on the Send button. Moderator Pat Mangan Director,
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KEY ISSUES AND TRENDS IN DIRECTOR COMPENSATION
Key Issues and Trends in Director Compensation Increased time and effort required by directors. Heightened Focus on Executive and Director Compensation in Tax-exempt Organizations. Implementation of Guiding Principles and Best Practices in Director Compensation.
BEST PRACTICES FOR DIRECTOR COMPENSATION
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Best Practices for Director Compensation
The board should establish a process by which directors can determine the level and composition
- f their compensation in a deliberate and objective
way. Director compensation should be approached on an overall basis, rather than an array of separate elements. All directors should be paid equally, with those serving as officers and/or committee chairs receiving extra compensation. The board should dismantle existing benefit plans for directors.
Best Practices for Director Compensation
Disclose fully in the proxy statement (IRS Form 990) the philosophy and process used to determine the director compensation and the value of all the elements of compensation. The board should adopt a policy stating that the company should not hire a director or a director’s firm to provide professional or financial services to the company (cooperative). The board should set a substantial target for stock
- wnership by each director and the time period
during which the target is to be met.
PROCESS FOR SETTING DIRECTOR COMPENSATION
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Process for Setting Director Compensation
Discuss and document the objectives of providing compensation to directors. Review the total compensation data of directors from other electric cooperatives. Establish a peer group. Review director compensation of local businesses.
Process for Setting Director Compensation Identify a relevant range and then decide where within that range you want to be. Document the process. Update the board compensation policy. Update your compensation communication plan.
How to Submit Your Question
Step 2: Click on the Send button. Step 1: Type in your question here.
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COMPENSATION PURPOSE & COMPONENTS
What are Directors Being Paid to Do?
- By-laws and policies.
- Job description.
- Outline of critical responsibilities.
Member and external relations. Short- and long-range planning. Major policies and business governing decisions. CEO evaluation. (including hiring and firing) Financial oversight. Risk & Compliance oversight.
Components of Cooperative Director Compensation Packages
- Per diems for board, committee and special meetings.
- Per diems for attending training or other industry-related
meetings.
- D&O insurance coverage.
- Accidental death insurance. (while on Cooperative
Business)
- Directors’ deferred compensation plans.
- Life and medical insurance.
- Directors’ retirement plans.
- “Retiree” Director medical insurance.
No longer considered a Best Practice.
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How to Submit Your Question
Step 2: Click on the Send button. Step 1: Type in your question here.
LEGAL AUTHORITY & DOCUMENTATION
Legal Authority & Documentation
State statutory language limiting compensation. Cooperative bylaws allowing compensation. Board policy detailing the compensation package.
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Policies
Director Compensation & Benefits. Director Expenses. Director Qualifications & Performance Expectations. Spotlight on Governance: Director Compensation Issues
VP National Consulting Group National Rural Electric Cooperative Association 703-907-6070 Monica.schmidt@nreca.coop