New Breeding Ground for Risk Topics

Board members of public companies are accustomed to passing along any risk related issues to the Audit Committee and/or Risk Committee. However, many of these directors are discovering risk related issues are not necessarily the specific purview of those groups. One committee in particular is becoming a breeding ground for risk topics – the Compensation Committee. With incentive programs entering the spotlight through greater disclosure about their impact on risk taking and heightened investor scrutiny, a new set of board directors need to be concerned with risk management. Here is what a leading expert had to say recently about the change.

Finally, an important means for compensation committees to address the risks that they now face is to ensure that they and the compensation-setting process are fully integrated into the overall risk-oversight activities of the board and the company. The financial crisis and its legislative and regulatory aftermath have focused considerable attention on the relationship between incentives in compensation programs and the risks that arise for companies, and as a result the compensation committee has become a crucial component of the risk-oversight process. The compensation committee’s attention to risks—through a periodic evaluation of the compensation program and how pay elements could create risks—has now become a regular part of the analytical framework.

How is your Compensation Committee addressing risk? Having the ability to articulate the linkage between incentive programs and a company’s risk appetite is critical to proactively addressing investor concerns.  If you or someone else in your company is interested in learning more about bridging this gap, contact us at NavigateSuccessfully@WheelhouseAdvisors.com.

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About Wheelhouse Advisors
Wheelhouse Advisors LLC is the publisher of The ERM Current™, an online publication and blog dedicated to providing the latest updates on current trends in Enterprise Risk Management & Control. Wheelhouse Advisors provides cost-effective Enterprise Risk Management & Control solutions to both large and mid-size corporations. To learn more about Wheelhouse Advisors, please visit our web site at www.WheelhouseAdvisors.com.

One Response to New Breeding Ground for Risk Topics

  1. business says:

    ..The purpose of the Risk Committee the Committee is to assist the Board of Directors in fulfilling its oversight responsibilities with regard to a the risks inherent in the business of the Corporation and the control processes with respect to such risks b the assessment and review of credit market fiduciary liquidity reputational operational fraud strategic technology data-security and business-continuity risks c the risk management activities of the Corporation and its subsidiaries and d fiduciary activities of the Corporations subsidiaries…In carrying out its oversight responsibilities each Committee member shall be entitled to rely on the integrity and expertise of those persons providing information to the Committee and on the accuracy and completeness of such information absent actual knowledge of inaccuracy…The Committee will have the resources and authority appropriate to discharge its responsibilities including sole authority to retain and terminate the engagement of such consultants or independent counsel to the Committee as it may deem necessary or helpful in carrying out its responsibilities and to establish the fees and other terms for the retention of such consultants and counsel such fees to be borne by the Corporation. ..Subject to the provisions of Article Five of the Corporations By-Laws the Committee will consist of three or more independent directors…Subject to the provisions of Article Five of the Corporations By-Laws Risk Committee members and the Committee Chairman a shall be appointed annually by the Board of Directors on recommendation of the Corporate Governance and Nominating Committee and b serve at the pleasure of the Board…Except as limited by law regulation or the rules of the New York Stock Exchange the Committee may form subcommittees for any purpose that it deems appropriate and may delegate to such subcommittees or to members of the Corporations management such power and authority as it deems appropriate provided however that any such subcommittees shall meet all applicable independence requirements and that the Committee shall not delegate to persons other than independent directors any functions that are required under applicable law regulation or stock exchange rule to be performed by independent directors…The Committee shall meet as frequently as necessary to fulfill its duties and responsibilities but not less frequently than quarterly.

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