The Expanding Compensation Committee Mandate NYSE's Public Company Series on Board Structure and Composition

Compensation committees have come a long way since their origin.

Whereas they traditionally, and exclusively, discussed executive pay, many committees today are vital partners on a wide variety of talent, performance management, culture, leadership development, and oversight issues. Broadly, these topics all fall under the umbrella of human capital management (HCM). The natural link between pay and HCM issues, along with a variety of external forces—from the 2010 Dodd-Frank Act to the COVID-19 pandemic—have continued to push compensation committees to evolve. In many instances, this evolution has resulted in ditching the “comp committee” moniker in favor of new names such as “human capital committee” or “compensation, culture, and people committee.” Companies are also rewriting their charters and rewiring committee responsibilities to capture this rapid expansion of the compensation committee mandate.

In the face of rapidly developing technological, regulatory, and societal shifts, boards are finding it essential to expand the scope and practice of corporate governance beyond the executive ranks. While this might have been unthinkable a decade ago, changing the compensation committee’s mandate to include HCM issues is a natural extension of previous duties. Advising on the performance, compensation, and trajectory of executive teams already granted compensation committees a way to promote diversity of thought, build inclusive cultures, encourage engagement, and foster creativity. Now, those core executive responsibilities are expanding to the larger employee population.

The following chapter explores how and why compensation committees’ mandates are evolving, why the shift is so important, and the steps boards can take to make the most of their expanded role. We also offer a roadmap, sample calendars, and tips for building a robust, adaptable, and data-driven “nextgeneration” compensation committee that can help talent-forward organizations succeed for decades to come.

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