I. History
II. SEC Rules and Regulations
III. SEC Staff Guidance
a. Compliance and Disclosure Interpretations 13-10
1. Disclosure about Compensation Consultants 13-10
2. Compensation Consultant Consents 13-10
3. Relationship to CD&A’s Discussion of Consultants 13-10
4. Scope of “Additional Services” 13-11
5. Fee Disclosure for Excluded Services 13-11
6. Additional Services” Includes All Services & Products 13-12
7. Omission of Compensation Committee Interlocks Disclosure 13-12
b. Comment Letters 13-12
IV. How the Rule Works
- Purpose of Compensation Committee Disclosure 13-15
- Relationship to CD&A 13-15
- Relationship to Compensation Committee Report 13-15
- Disclosing Authority Over Compensation Matters 13-16
- Disclosing Role of Executive Officers 13-16
- Disclosing Identity of Compensation Consultants 13-16
- Disclosing Role of Compensation Consultants 13-16
- Exception for Non-Discriminatory Plans & Non-Customized Information 13-17
- Compensation Consultant Fee Disclosure 13-18
- “Additional Services” Is Broadly Interpreted 13-19
- Independence of Compensation Committee Advisers 13-19
- No Consent Necessary from Consultants 13-22
- Authority Over Advisers & Funding 13-22
- Compensation Consultant Conflict of Interest Disclosure Requirements 13-22
- Disclosure & Posting of Compensation Committee Charter 13-23
- Disclosing Charter’s Delegation Limits 13-24
- Compensation Committee Interlocks/Insider Participation 13-25
- Lack of Compensation Committee . 13-26
- Independence of Compensation Committee Members 13-26
V. Common Questions and Our Analysis
a. Change in Committee Membership 13-27
b. Definition of Compensation Committee 13-28
c. Omission of Compensation Committee Report 13-28
d. Omission of Interlock Disclosure 13-28
e. CD&A’s Relationship to Committee Disclosure 13-29
f. Referral of Compensation Consultant 13-30
g. Instructions to Compensation Consultant 13-30
h. Definition of “Additional Services” 13-30
i. Rare to Have Pre-Approval Policy for “Additional Services” 13-31
j. Overlap Between “Independence” & “Conflicts” Analysis 13-31
k. Compensation Consultant Indemnification 13-32
l. One Consultant Working for Two Different Firms 13-32
m. ISS Corporate Services Isn’t a Consultant 13-33
n. Law Firm Refusal to Provide Independence Information 13-33
o. Compensation Consultant’s Stockholdings & Independence 13-34
p. Nasdaq’s Requirement to Establish Compensation Committees 13-34
q. Compensation Consultant Rotation 13-35
r. Compensation Committees Not Setting Pay for More Junior Officers 13-35
VI. Compensation Adviser Conflict of Interest Questionnaire
VII. Sample Disclosures
