How Executive Compensation Committees Can Ensure Success

<strong>Key 1: Role Definition</strong> – There’s no question that executive compensation continues to be a complicated mixture of emotional, value-laden issues. An executive compensation committee’s first step toward achieving success is defining its role in the board governance process and how it will work on behalf of the full board and the membership.

Executive compensation committees are typically comprised of three to five members. While a credit union usually appoints directors to the committee, a board should not hesitate to solicit additional volunteers to strengthen its collective expertise and knowledge. For example, human resource executives, academia, attorneys and local business owners can add value to the process when a board seeks additional diversity. Committee members with different backgrounds can lead to better discussions and ultimately stronger decisions.

The committee chair should be a strong facilitator who stresses open discussion, transparency and willingness to hear opposing viewpoints, while being an effective communicator and consensus builder.

The biggest red flag for an ineffective committee is where committee work is re-done at the board level. In other words, the full board questions the committee’s work to the point that it basically starts from scratch. The committee chair thus must stand strong to protect the integrity of the process by making sure the full board is prepared to make effective executive compensation decisions.

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Thursday April 24, 2014

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