Compensation Committee Charter

Organization: [ORG]
Adopted by the Board of Directors: [DATE]
Last reviewed: [REVIEW_DATE]
Committee type: Standing committee of the Board
Authority: Bylaws §[X]; Board resolution dated [DATE]

Template notice. Public companies face proxy, say-on-pay, and independence rules; nonprofits face Form 990 and intermediate sanctions considerations; startups may use a lighter committee or full-board process. Tailor with counsel and compensation advisers. Replace bracketed placeholders.

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1. Purpose

The Compensation Committee (the “Committee”) assists the Board in overseeing [ORG]’s compensation philosophy and practices for the Chief Executive Officer / Executive Director and other [EXECUTIVE OFFICERS / KEY EMPLOYEES] designated by the Board, including:

1. Setting and evaluating CEO goals and compensation;
2. Reviewing compensation for other executives as defined herein;
3. Overseeing incentive, bonus, equity, and deferred compensation plans for the covered population;
4. Ensuring processes support reasonableness, talent retention, mission alignment, and regulatory compliance; and
5. Coordinating with the Board on CEO succession planning as it relates to compensation and contracts.

The Committee promotes independent judgment: executives do not set their own pay.

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2. Membership and Independence

• Size: [3–5] directors appointed by the Board upon [GOVERNANCE COMMITTEE] recommendation.
• Independence: All members shall meet [ORG]’s director independence standards and any additional compensation-committee independence requirements applicable to [ORG].
• Chair: Appointed by the Board.
• Conflicts: Members with relationships to executives that create conflicts shall recuse. No member may be a current executive of [ORG].
• Term: [1–3] year renewable terms.

For nonprofits seeking a rebuttable presumption of reasonableness, the Committee shall be composed of individuals without a conflict of interest regarding the compensation arrangement under review.

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3. Meetings

The Committee meets at least [2–4] times per year and additionally as needed for hiring, mid-year adjustments, or market events. Quorum is a majority of members. The CEO may attend portions of meetings by invitation but shall not attend deliberations or voting on the CEO’s own compensation.

The Committee shall meet in executive session without management when discussing CEO performance and pay. Minutes shall reflect attendees, materials considered (including comparability data), recusals, and decisions, with confidential detail handled per the Executive Session Policy.

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4. Authority and Advisers

The Committee may, in its sole discretion, retain or obtain advice from compensation consultants, legal counsel, and other advisers. The Committee shall be directly responsible for appointment, compensation, and oversight of such advisers’ work for the Committee.

Before selecting a compensation consultant, the Committee shall consider independence factors relevant under applicable rules (other services to [ORG], fees, relationships with Committee members or executives, stock policies, etc.).

[ORG] shall provide appropriate funding for advisers and administrative expenses as determined by the Committee. Engagements above $[THRESHOLD] should be noted to the Board Chair.

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5. Duties and Responsibilities

5.1 Compensation philosophy

• Recommend to the Board a compensation philosophy aligning pay with [ORG]’s strategy, risk appetite, talent market, and (for nonprofits) mission and charitable purpose;
• Periodically review peer groups and market positioning (e.g., target percentile ranges).

5.2 CEO compensation and evaluation

• Recommend CEO goals to the Board (or approve if delegated);
• Lead the annual CEO performance evaluation process, soliciting Board input;
• Recommend CEO base salary, incentives, benefits, perquisites, severance, and employment agreement terms;
• Ensure documentation of the basis for reasonableness (comparability data, performance outcomes, retention needs).

5.3 Other executive compensation

• Review and approve, or recommend to the Board, compensation for [OTHER NEOs / KEY EMPLOYEES];
• Review the CEO’s recommendations for direct reports with constructive challenge;
• Oversee aggregate incentive pool funding where applicable.

5.4 Incentive and equity plans

• Oversee design of cash bonus plans, equity/option plans, phantom equity, or other long-term incentives for the covered population;
• Assess performance metrics for balance (growth vs. risk, financial vs. mission outcomes, qualitative modifiers);
• Review clawback / recoupment provisions and recommend adoption or updates of a clawback policy consistent with law and best practice;
• For nonprofits: avoid private inurement; document reasonableness; consider intermediate sanctions process.

5.5 Contracts, severance, and change-in-control

• Review employment, severance, and change-in-control arrangements for covered executives before execution or renewal;
• Evaluate cost, triggers, non-compete/non-solicit enforceability (high level), and reputational impact.

5.6 Succession and talent (compensation-related)

• Coordinate with the Board/[GOVERNANCE COMMITTEE] on CEO succession planning, including emergency interim pay arrangements;
• Review leadership development spend only as it relates to compensation strategy (broader talent oversight may sit elsewhere).

5.7 Risk and culture review

• Consider whether compensation programs encourage excessive risk-taking or unethical conduct;
• Review pay equity concerns escalated by management or Board that implicate executive programs;
• Receive briefings on material compensation-related litigation or regulatory inquiries.

5.8 Disclosure

• Review compensation disclosures in [proxy / Form 990 Part VII and Schedule J / member reports] for consistency with Committee decisions;
• Oversee say-on-pay preparation where applicable.

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6. Process standards (reasonableness)

When approving or recommending executive compensation, the Committee shall, as applicable:

1. Rely on appropriate comparability data (peer surveys, Form 990s of peers, consultant reports);
2. Ensure contemporaneous documentation of deliberations and decisions;
3. Exclude Interested Persons from the vote;
4. Consider total remuneration, not only salary; and
5. Align payouts with documented performance results and risk adjustments.

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7. Reporting to the Board

The Chair reports to the Board after significant meetings, including CEO evaluation outcomes at an appropriate summary level, recommended CEO pay actions requiring Board approval, plan design changes, and adviser independence conclusions. Annually, the Committee evaluates its performance and reviews this Charter.

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8. Coordination with other committees

• Audit Committee: clawbacks triggered by restatements; fraud findings affecting bonuses.
• Governance Committee: independence of Committee members; Board evaluation input to CEO evaluation.
• Full Board: final approval of CEO compensation if not fully delegated; succession.

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9. Limitation of role

The Committee oversees compensation governance for the covered population. Day-to-day people management and broader workforce pay systems remain management responsibilities, except where the Board requests periodic workforce pay overview.

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10. Charter review

Reviewed at least annually; material amendments require Board approval. Next review: [NEXT_REVIEW_DATE].

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Appendix — Annual calendar (starter)