Foreword ix Preface xiii Acknowledgments xvii About the Authors xix PART One THE MODERN COMPENSATION COMMITTEE 1 CHAPTER 1 The Compensation Committee 3 Board Structure: The Focus on Independence 4 Compensation Committee Composition and Multiple Independence Requirements 5 Compensation Committee Size 10 Compensation Committee Charter 11 Role of the Compensation Committee 13 Role of the Compensation Committee Chair 14 Duties and Responsibilities of the Compensation Committee 14 Compensation Benchmarking 26 The Importance of Compensation Committee Meeting Minutes 29 Call to Action 31 CHAPTER 2 Selecting and Training Compensation Committee Members 33 The Role of the Nominating Committee 33 Nomination and Selection of New Compensation Committee Members 34 Time Commitment 39 Diversity 40 Attracting Candidates 41 Conducting the Search 41 How to Approach Candidates 43 CEO Involvement in the Selection Process 43 Making the Final Selection 44 How to Say No 47 What if the New Director Does Not Work Out? 47 Benefits of an Educated Board 48 Orientation of New Members 49 Ongoing Training 51 Outside Experts and Advisors 53 CHAPTER 3 CEO Succession and Evaluation 59 The Relationship Between Pay and Succession Planning 61 The Advantages of Effective Succession Planning 65 The Succession Planning Process 67 CEO Evaluation 73 CHAPTER 4 Director Compensation 97 Overview 97 Elements of Director Compensation 99 Disclosure 103 Trends in Director Compensation 106 Conducting a Director Compensation Study 109 PART Two LEGAL AND REGULATORY FRAMEWORK 115 CHAPTER 5 Corporate Governance 117 Fiduciary Duties of Directors 117 Practical Applications of Fiduciary Duty Rules 126 Stock Exchange Corporate Governance Rules 131 External Compensation Policies and Guidelines 131 CHAPTER 6 Disclosure of Executive and Director Compensation 143 Background 143 Compensation Discussion and Analysis 144 The Tabular Disclosures 146 Option Grant Practices 154 Director Compensation 155 Disclosure of Material Compensation Risk 155 Compensation Disclosure Requirements for Smaller Reporting Companies 157 Golden Parachute Compensation 158 Pending Dodd-Frank Disclosure Requirements 160 Beneficial Ownership Reporting 162 Disclosure of Related Person Transactions 162 Director Independence and Governance Disclosure 163 Disclosure of Equity Compensation Plans 165 Plan Filing Requirements 167 Form 8-K 168 Selected Provisions of Regulation S-K 168 CHAPTER 7 Other Securities Issues 171 Selected Dodd-Frank Provisions Relating to Executive Compensation 171 Special Rules Regarding Stock Transactions 175 NYSE/NASDAQ Rules: Approval of Equity Compensation Plans 189 Selected Sarbanes-Oxley Provisions Relating to Executive Compensation 193 CHAPTER 8 Tax Rules and Issues 199 Overview 199 Organizations Responsible for Federal Tax 200 Major U.S. Tax Law and Issues 201 CHAPTER 9 Accounting Rules and Issues 255 Overview 255 Organizations Responsible for Accounting Standards (Past and Present) 256 New Equity-Based Compensation Accounting Rules 261 Previous Equity-Based Compensation Accounting Rules Under U.S. GAAP 280 Other Current and Past Accounting Standards 283 CHAPTER 10 ERISA and Labor Law, Rules, and Issues 305 ERISA Law and Regulations 305 Labor Laws and Regulations 309 ADEA Law 310 PART Three PRACTICAL APPLICATIONS 315 CHAPTER 11 Executive Employment, Severance, and Change-in-Control Arrangements 317 Background 317 At-Will Employment Arrangements 318 Contractual Employment Arrangements 319 Fundamental Elements of a Written Employment Arrangement 320 Process 322 Types of Employment Arrangements 323 Terms and Conditions Contained in Employment Arrangements 325 CHAPTER 12 Incentive Compensation 349 Useful Definitions and Abbreviations 349 Cash versus Equity 352 Typical Plan Features and Designs 353 Shareholder Approval Requirements 364 Retention-Only Plans 364 CHAPTER 13 Equity-Based Compensation 367 Equity-Based Incentive Awards 367 Stock Ownership and Retention Guidelines 384 CHAPTER 14 Executive Pension-Benefit, Welfare-Benefit, and Perquisite Programs 387 List of Programs 388 Pension-Benefit Arrangements 388 Welfare-Benefit Arrangements 397 Perquisites 400 APPENDIX A Selected SEC Rules, Regulations, Schedules, and Forms 405 APPENDIX B List of Organizations and Periodicals 511 APPENDIX C List of Director''s Colleges and Other Training Opportunities 519 APPENDIX D Sample Compensation Committee Charters 527 APPENDIX E Sample Compensation Discussion and Analysis (CD&A) 547 Glossary 633 Bibliography 685 Index 699.