White Paper

Compensation committees serving public corporations are facing unprecedented scrutiny as they react to recent executive pay reform efforts led by federal lawmakers and agencies, institutional shareholders and corporate governance watchdogs. The most sweeping impact on executive compensation practices may come from the Corporate and Financial Institution Compensation Fairness Act of 2009 (the "Act").

As part of Washington’s focus on reforming executive compensation practices that have been criticized for being partially responsible for the economic crisis of 2008, the Act embodies broad principles that have been embraced by the White House and Congress, along with other reform proponents. These include the following core ideas: executive compensation practices should be meaningfully related to performance; interests of executives should be aligned with the company and its shareholders; and unreasonable and imprudent risk-taking should not be incentivized. In addition, the process of establishing executive compensation schemes should be transparent, protect against bias and provide for enhanced accountability.

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