Terms of Reference for the Remuneration Committee

Importantly, the remuneration committee can also be known as a compensation committee. Typically, one is formed from the Board of Directors to guide the board in director and executive compensation matters. As well as succession planning, and recruitment.  Essentially, the Terms of Reference for the Remuneration Committee sets out the guidelines for the committee.

Firstly, a good term of reference is essential to corporate governance. This is because it drives behavior and proper incentives to both the board and to the parties affected by compensation decisions.

In this document, we lay out the basic duties of a remuneration committee along with key points that need to be tailored and addressed for an effective committee.

What is in the Terms of Reference for the Remuneration Committee?

Purpose of the Committee.  The document must lay out the key purpose of the committee and the authority provided by the board.

Membership. The terms of reference must outline the membership of this committee. Additionally, this includes who will be the chairperson (the person convening the meeting). Also, the members that must be involved.  Membership includes the number of members as well as how they will be appointed or removed from the committee.

Meeting Proceedings.  Notably, the terms of reference must also detail the frequency in which meetings will be held

When Should You Use a Terms of Reference for the Remuneration Committee?

The Terms of Reference for the Remuneration Committee is  a key part of corporate governance outlining the composition of the remuneration committee and the responsibilities of the committee.

What are the responsibilities of the remuneration committee?

The main responsibility of a remuneration committee is to set a company’s remuneration policy. They need to determine remuneration packages and also set up targets for performance-related pay.

Conclusion

A Zegal template can help you get started in establishing good corporate governance.  As with all templates, you can tailor this to customize to your needs and that of your organization’s.

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Along with this document, make sure you see these other templates in our library:

• Shareholder Agreement
• Option Agreement
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• Share Option Plan

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