Addressing a question that arises periodically among our membership, “The Board’s Role in CEO and Director Compensation: Examining Leading Practices and Trade-offs” from Compensation Advisory Partners shares helpful benchmarking data and associated commentary on companies’ CEO and director pay oversight and approval practices based on a review of disclosures made by the 110 largest S&P 500 companies.
CEO compensation—CEO pay is most commonly approved at the compensation committee, rather than the full board, level:
In those cases where the full board approves the compensation, approval is typically subject to a recommendation from the compensation committee.
Director compensation—While most companies charge the compensation committee with responsibility for director pay, the nominating/governance committee tails closely behind:
Regardless of where the responsibility lies, the full board nearly always (97%) retains final approval over director pay.
The report addresses the potential upsides and downsides of each approach to both CEO and director pay and includes aggregated data by GICS sector.