Compensation and Risk: Compensation Committee Actions Under New SEC Rules

The SEC’s new disclosure rules on the relationship of compensation and risk spotlight the work of the Compensation Committee and the process it uses to assess the risk implied by compensation programs and arrangements. Given the intense focus on public company compensation, Compensation Committees should refresh their practices to assure that they are appropriately addressing the implications of their compensation decisions for the company’s risk profile. The attached note provides practical guidance to directors serving on Compensation Committees and those who advise them about key questions and process points that they should consider from a risk perspective when designing, reviewing and implementing performance-based compensation plans.