Sample Compensation Committee Charter

Sample_Documents

DISCLAIMER: This is a sample template provided for informational purposes only. It does not constitute legal, tax, or financial advice. Organizations should consult their own legal and tax advisors and tailor this document to reflect their specific business needs, geographies, and applicable laws.

Compensation Committee Charter: <Company Name>

Field	Value
Document Type	Compensation Committee Charter
Category	Compliance & Governance
Company	<Company Name>
Document Number	<Document ID>
Version	<Version Number>
Effective Date	<Date>
Last Review Date	<Date>
Next Scheduled Review	<Date> (every <12> months or as required)
Committee Owner	Board of Directors, Compensation Committee
Committee Chair	<Chair Name>, Independent Director
Management Liaison	<CHRO Name>, Chief Human Resources Officer
Legal Liaison	<General Counsel Name>, General Counsel
Jurisdiction	<Country> and other applicable jurisdictions
Related Policies	Equity Incentive Plan, Clawback Policy, Insider Trading Policy, Stock Ownership Guidelines, Severance Policy, Pay Equity Policy, Delegation of Authority Policy

Statement of Alignment with Corporate Governance

This Charter forms part of the governance framework of <Company Name> and is approved by the Board of Directors.
In case of conflict with applicable law or listing standards in <Country>, those laws and standards prevail. The Committee will recommend updates to keep this Charter current.

Purpose and Objectives

Establish and oversee the executive and broad-based compensation programs of <Company Name> to support the company’s strategy, culture, and long-term value creation.
Ensure pay practices are market-competitive, performance-based, equitable, compliant with applicable laws, and aligned with shareholder and stakeholder interests.
Oversee CEO and executive officer compensation, incentive plan design and goal setting, equity plan administration, pay equity and fairness, and compensation-related risk management.
Fulfill disclosure, governance, and regulatory obligations in <Country> and other applicable jurisdictions.

Scope and Applicability

In Scope

CEO and Named Executive Officers (NEOs) compensation structure, goals, and outcomes.
Senior leadership compensation programs covering the top <N>% of employees or pay grades <X> and above.
Company-wide annual and long-term incentive plans, equity plans, and material benefits/perquisite programs.
Employment, retention, change-in-control, and severance arrangements for executives.
Pay equity reviews, geographic pay strategy, and job architecture alignment for total rewards.
Compensation-related risk, clawback, hedging/pledging, insider trading, and stock ownership guidelines.
Review of compensation disclosures, shareholder proposals, and say-on-pay outcomes.

Out of Scope (Managed by Management under Policy Boundaries)

Routine compensation actions within approved budgets and salary structures below threshold authorities established by the Delegation of Authority Policy.
Day-to-day HR operations, individual employee transactions below <Amount> or outside executive population.
Non-compensation business decisions such as pricing, product, or capital allocation outside the Committee’s remit.

Applicability

Applies to <Company Name> and its controlled subsidiaries as defined by <Country> law, except where local law requires deviations. Local variations must be documented and reported to the Committee.

Authority and Independence

The Committee is a standing committee of the Board, acting under authority delegated by the Board.
The Committee has full authority to retain, compensate, and direct independent advisors, including compensation consultants, legal counsel, and other advisors, with fees paid by the company.
The Committee may request any information it deems necessary from management and may conduct or direct any investigation relevant to its responsibilities.
The Committee may delegate specific responsibilities to the Committee Chair, subcommittees, or management, provided that the Committee retains oversight and accountability.

Committee Composition

Membership

Minimum of <3> directors; all members must be independent under applicable listing standards and Board independence criteria.
Members should possess expertise in executive compensation, corporate governance, strategy, risk oversight, and talent management. At least one member should have significant Total Rewards experience.
Members and Chair are appointed and may be removed by the Board.

Chair Responsibilities

Set meeting agendas in consultation with the CHRO and Corporate Secretary.
Lead meetings, ensure adequate time for discussion, and foster open dialogue with management and advisors.
Report to the full Board on key decisions, risks, and recommendations.

Tenure and Rotation

Typical member term of <3> years with staggered rotations to maintain continuity.
Annual evaluation of Committee effectiveness and member performance.

Meetings and Operations

Frequency and Scheduling

Meet at least <4> times per year and additionally as needed to meet fiscal calendar and disclosure timelines.
Establish an annual calendar aligned with business planning cycles, goal setting, and equity grant windows.

Quorum and Voting

A majority of members constitutes a quorum. Actions require a majority vote of members present.

Executive Sessions

Hold regular executive sessions without management present.
Convene sessions with independent advisors, as appropriate.

Materials and Minutes

Distribute pre-read materials at least <5> business days prior to meetings.
Maintain minutes and action registers; the Corporate Secretary retains records in accordance with the Records Management Policy.

Roles and Responsibilities

Compensation Philosophy and Strategy

Review and recommend a written compensation philosophy aligned to company values, risk appetite, and long-term strategy.
Approve market positioning targets (for example, median or <Percentile> of peer group) and desired pay mix (for example, base <30-40>% / annual incentive <20-30>% / long-term <40-60>% for executives).
Oversee geographic pay strategy, job architecture, and salary structure design.

CEO and Executive Compensation

Recommend CEO compensation to the Board for approval, including base salary, annual incentive targets and goals, long-term incentive awards, and any special arrangements.
Approve compensation for NEOs and other Section <Number> officers upon recommendation from the CEO and CHRO.
Review total direct compensation, benefits, perquisites, and post-employment arrangements to ensure market competitiveness and alignment with performance and shareholder interests.

Incentive Plan Design and Goal Setting

Approve annual and long-term incentive plan frameworks, eligibility, target opportunities, funding mechanisms, and payout leverage.
Approve performance measures (for example, revenue, EBITDA, free cash flow, strategic milestones, relative TSR), weighting, and goal rigor with targets linked to the Board-approved budget and strategic plan.
Establish threshold/target/maximum performance and payout curves (for example, threshold 50% payout at 80% of target; maximum 200% payout at 120% of target).
Approve use of discretion and guardrails for unforeseen events, including positive and negative discretion policies and documentation standards.

Equity Compensation Oversight

Recommend to the Board for shareholder approval any new equity plans or material amendments.
Approve annual share pool usage, individual award guidelines, vesting schedules (for example, RSUs vest over <3-4> years; PSUs vest after <3> years based on performance), and performance conditions.
Monitor burn rate, dilution, and overhang against internal guidelines (for example, annual gross burn rate not to exceed <Percentage>% and total overhang below <Percentage>% without special approval).

Pay Equity, Fairness, and Transparency

Oversee annual pay equity analysis across gender, race/ethnicity, and other locally protected characteristics, including remediation plans and budget (for example, <Amount> or <Percentage>% of payroll).
Review internal pay ratios and compression hotspots; approve structural adjustments to ranges or policies to support fair pay.
Ensure external pay transparency requirements in <Country> and other jurisdictions are met.

Risk and Compliance

Conduct annual incentive risk review to ensure plans do not drive excessive risk-taking; implement risk mitigators such as caps, balanced measures, and deferral where appropriate.
Oversee and recommend adoption of clawback and malus policies, hedging and pledging prohibitions, and insider trading windows.
Review compensation-related compliance and disclosures, including the Compensation Discussion and Analysis or equivalent in <Country>.

Employment Agreements and Severance

Approve material employment, retention, change-in-control, severance, or non-compete agreements for executives, including double-trigger CIC provisions and severance not exceeding <Multiple of Pay> without special Board approval.
Ensure agreements include restrictive covenants, recoupment, and mitigation clauses consistent with company policy and local law.

Stock Ownership Guidelines

Approve stock ownership requirements (for example, CEO <6x> base salary, NEOs <3x> base salary, Directors <5x> annual cash retainer), holding requirements, and compliance monitoring.
Approve consequences for non-compliance, such as restrictions on selling shares or reduced future equity awards.

Use of Advisors

Retain and oversee independent compensation consultants and legal advisors; evaluate advisor independence annually per applicable rules.
Review advisor scope, fees, and any potential conflicts of interest.

Board and Shareholder Engagement

Review say-on-pay outcomes and shareholder feedback; approve engagement plans to address concerns.
Recommend to the Board any changes required to maintain support from key stakeholders and proxy advisors.

Executive Compensation Framework and Guidelines

Elements of Pay

Base Salary: Provides market-competitive fixed pay; targeted at <Percentile> of market for sustained performers; adjusted annually considering performance, market movement, and internal equity.
Annual Incentive (STIP): Performance-based cash bonus with target opportunities by level; typical target ranges: CEO <100-150>% of base, NEOs <60-100>%, senior leaders <20-60>%.
Long-Term Incentive (LTI): Mix of PSUs, RSUs, and options with a typical allocation of PSUs <50-70>%, RSUs <20-40>%, options <0-20>% based on strategy and market norms.
Benefits and Perquisites: Market-aligned benefits; perquisites limited and aligned with business purpose; any unusual perquisites above <Amount> require Committee approval.

STIP Design Parameters

Funding: Payouts funded based on company performance against pre-set goals; minimum performance required for funding.
Metrics: Financial metrics (for example, revenue growth, EBITDA margin, cash conversion), strategic metrics (for example, customer NPS, cybersecurity readiness), and individual performance.
Leverage: Threshold typically 50% of target; maximum 200% of target; individual payouts capped at <200>% absent Committee-approved exceptions.
Sample Payout Curve: Threshold at 80% of target performance pays 50%; 100% performance pays 100%; 120% pays 200%.

LTI Design Parameters

Performance Period: <3> years for PSUs, graded or cliff vesting for RSUs over <3-4> years, options vest over <4> years.
Performance Metrics: Relative TSR vs. <Peer Index or Peer Group>, cumulative EBITDA, revenue CAGR, or ESG goals aligned with strategy.
Dilution Guardrails: Maintain dilution below <Percentage>% and ISS/Glass Lewis norms in applicable markets; seek shareholder approval if limits may be exceeded.
Repricing and Regranting: No option repricing, backdating, cash-for-cancel, or underwater exchange without prior shareholder approval.

Peer Groups and Market Data

Define a primary and secondary peer group using criteria such as industry, size (<Revenue Range>, market cap), and geography.
Use multiple data sources (for example, <Vendor Name> surveys, peer proxy filings) and regression where appropriate to normalize for size.

Treatment of Special Circumstances

New Hires: Sign-on awards limited to make-whole amounts; subject to clawback and vesting aligned with policy.
Promotions: Prorate incentive targets as appropriate; mid-year equity grants require approval within annual burn guidelines.
Adjustments: Establish a documented framework for permitted adjustments to performance outcomes (for example, acquisitions, divestitures, extraordinary items), with transparent rationale and disclosure.

Equity and Incentive Plan Governance

Share Pool Management

Annual share request plan including projected hiring, promotions, and refresh grants.
Monitor gross and net burn, overhang, and run rate; if metrics exceed <Percentage>% thresholds, escalate to the Board with remediation options (for example, mix shift, grant sizing reductions).

Grant Practices

Standard grant dates aligned with earnings windows and Board meetings; avoid granting during blackout periods.
Grant pricing based on closing market price on the approved grant date per plan rules.
Individual grant guidelines by level with caps; off-cycle grants require Chair pre-approval.

Change-in-Control (CIC) Provisions

Prefer double-trigger vesting (change in control plus qualifying termination) for equity and severance.
Define CIC consistently across plans and agreements; avoid single-trigger cash-outs unless required by local market practice.

Risk Management and Compliance

Risk Review Framework

Annual review of incentive plans against risk criteria, including measure balance, payout caps, deferral needs, and control functions’ participation.
Coordinate with Internal Audit, Risk, and Compliance to test controls around data integrity, goal setting, and payout calculations.

Clawback and Malus

Adopt a clawback policy that permits recoupment in the event of material financial restatement, misconduct, or significant harm to the company, to the extent permitted by law in <Country>.
Include pre-vesting malus provisions for unvested awards when warranted.

Hedging, Pledging, and Insider Trading

Prohibit hedging and pledging of company securities by directors, executives, and employees subject to policy; require pre-clearance for any exceptions.
Enforce trading windows and blackout periods consistent with securities laws in <Country>.

Legal and Regulatory Compliance

Ensure compliance with applicable listing standards, corporate law, tax regulations, securities disclosure, and governance codes in each relevant jurisdiction.
Coordinate with Legal on emerging requirements such as pay transparency, pay-for-performance disclosure, and CEO pay ratio reporting where applicable.

Pay Equity, Fair Pay, and DEI Integration

Pay Equity Analysis Cadence

Conduct pay equity studies at least annually and after major organizational changes; use regression-based methodology to control for job-related factors.
Approve remediation budgets and timelines (for example, implement adjustments within <Quarter> following study completion).

Salary Structures and Transparency

Approve global philosophy for salary ranges, geo-differentials, and progression guidelines; publish ranges in job postings where required.
Monitor compression and inversion; authorize targeted adjustments to maintain healthy differentials between levels.

Governance and Reporting

Receive aggregated reporting on representation, promotion rates, and pay outcomes by demographic segment where local law permits.
Ensure employee privacy and data protection consistent with <Country> privacy laws.

Succession Planning and Talent Governance

Review CEO and executive succession plans at least annually with the Board.
Align retention and development actions with compensation tools (for example, performance-based retention PSUs or milestone-based RSUs) under defined thresholds.
Require business cases for any special retention awards above <Amount> or outside normal cycles.

Use of Advisors and Independence Standards

Evaluate advisor independence annually considering services provided, fees, conflict checks, and policies to prevent undue influence.
Require advisors to attest to independence and disclose any actual or potential conflicts; rotate lead consultant after <Years> years when prudent.

Implementation Guidelines for Total Rewards and HR

Annual Compensation Cycle Calendar

Q1: Review year-end performance, approve bonus funding, confirm LTI vesting outcomes, and determine executive payouts
Q2: Approve compensation philosophy updates, peer group, market data sources, and preliminary LTI design
Q3: Approve STIP metrics and targets, LTI metrics, and draft grant guidelines; conduct pay equity analysis
Q4: Approve base salary budgets, individual executive recommendations, equity share pool and annual grants, and finalize disclosures

Roles and Hand-offs

CHRO: Orchestrates the cycle, prepares proposals, and ensures alignment with HR operations.
Total Rewards: Designs plans, runs analytics, prepares market data, calculates payouts, and drafts disclosures.
Finance: Validates targets, affordability, and payout funding; confirms financial results for incentive calculations.
Legal/Compliance: Reviews policies, contracts, and disclosures; monitors regulatory changes.
Internal Audit: Tests key controls over data, calculations, and plan administration.

Data, Controls, and Documentation

Maintain controlled workbooks or system reports with versioning, sign-offs, and change logs for all calculations.
Use documented data sources for metrics; reconcile against audited financials where applicable.
Implement maker-checker validations for all executive payouts and equity grants; obtain written approvals per Delegation of Authority.

Exceptions and Change Control

Document and justify any exceptions to policy; include impact analysis, alternatives considered, and legal review.
Chair pre-approval required for off-cycle grants or awards above guidelines; full Committee approval at next meeting.

Systems and Vendor Management

Validate HRIS, equity administration, and payroll integrations; perform annual SOC report reviews for <Vendor Name> and others.
Establish service-level agreements and escalation paths for critical processes (for example, grant delivery, vesting, and tax withholding).

Review, Evaluation, and Approval Process

Charter Review Cycle

Review this Charter at least annually or more frequently upon regulatory changes, shareholder feedback, or strategic shifts.
Proposed changes are recommended by the Committee and approved by the Board.

Committee Self-Assessment

Conduct an annual assessment of Committee performance, including meeting effectiveness, quality of materials, and oversight coverage.
Develop and track action plans arising from assessments.

Approvals and Attestations

The Committee Chair and Corporate Secretary attest to Charter currency after each review.
Maintain an approvals log stating the effective date, approvers, and summary of changes.

Records Management and Retention

Retain Committee materials, models, and minutes for at least <Years> years or longer if required by law or litigation hold.
Secure storage with restricted access; dispose of records per Records Management Policy and privacy requirements.

Reporting to the Board and Shareholders

Provide the Board with written and verbal reports after each meeting summarizing key actions, recommendations, and emerging risks.
Review and approve compensation-related sections of annual filings or reports in <Country>, including remuneration reports and pay-for-performance disclosures, as applicable.
Recommend the frequency of say-on-pay votes and oversee shareholder engagement strategies.

Annual Committee Calendar (Sample)

Month	Core Agenda Items
January-February	Approve bonus funding; review audited results; certify PSU outcomes; approve executive payouts
March-April	Approve peer group; confirm philosophy; approve STIP and LTI metrics and targets; review share pool
May-June	Approve grant guidelines; authorize annual equity grants; review risk assessment and clawback policy
July-August	Mid-year progress check; review pay equity analysis results and remediation plan; refresh market data
September-October	Approve base salary budgets; review executive proposals; succession and retention planning
November-December	Finalize disclosures; review say-on-pay preparedness; approve next-year calendar and education plan

Legal Notices and Limitations

This Charter is not a contract and does not create any employment rights or guarantees of compensation or continued employment.
To the extent permitted by law in <Country>, the Committee may interpret, suspend, or recommend changes to compensation programs consistent with this Charter.
If any provision of this Charter is found unlawful or unenforceable in any jurisdiction, the remaining provisions remain in effect.

Glossary of Terms and Definitions

Base Salary - Fixed cash compensation for performing job responsibilities.
STIP - Short-Term Incentive Plan, typically an annual cash bonus tied to company and individual performance.
LTI - Long-Term Incentive, typically equity-based awards (RSUs, PSUs, options) aligned to multi-year performance and retention.
RSU - Restricted Stock Unit that vests over time, delivering shares upon vesting.
PSU - Performance Share Unit that vests based on achievement of specified multi-year goals.
Overhang - Total outstanding and available equity awards as a percentage of shares outstanding.
Burn Rate - Annual equity awards granted as a percentage of average shares outstanding.
Clawback - Policy permitting the company to recover incentive compensation under defined circumstances.
Malus - Provision allowing reduction or cancellation of unvested awards due to defined events.
CIC - Change in Control, typically defined by a change in ownership or effective control as specified in plan documents.
Peer Group - Set of companies used for market comparisons of pay levels and practices.
Say-on-Pay - Advisory shareholder vote on executive compensation.
Total Direct Compensation - Sum of base salary, annual incentive at target, and LTI grant-date value.
Pay Equity Analysis - Statistical review to identify and remediate unexplained pay differences after controlling for job-related factors.
Threshold/Target/Maximum - Performance and payout points defining incentive plan leverage.
Hedging/Pledging - Financial transactions used to offset or leverage holdings; typically restricted for insiders.
Pay-for-Performance Alignment - Relationship between company performance outcomes and realized or realizable pay.

Communication to Employees and Managers

What This Charter Means for You

The Compensation Committee Charter explains how <Company Name> makes pay decisions for executives and how our pay programs support the company’s strategy. While much of the detail is about Board oversight, there are a few principles that affect how all employees and managers experience compensation.

First, our pay is designed to be fair, competitive, and performance-based. We use market data from reputable sources and maintain salary ranges by role and location. This helps ensure you are paid consistently with the work you do and the market where you do it. Managers use these ranges when making offers, promotions, and annual adjustments.

Second, incentives are linked to clear goals. Each year, we set company and team goals that align with our strategy. When the company and our teams perform, incentive pools fund, and individuals may earn bonuses based on results and contributions. We set threshold, target, and maximum levels so that payouts increase with performance, and we cap payouts to discourage excessive risk-taking.

Third, equity is about long-term ownership. For eligible roles, we grant equity (for example, RSUs or PSUs) to align you with shareholders and reward sustained performance. Equity vests over time, which means it is earned by staying and contributing to the company’s success. We schedule grant dates to avoid trading blackout periods and communicate vesting schedules in advance.

Fourth, fairness matters. We conduct regular pay equity reviews to identify and fix unexplained differences. If you have questions about your pay, your manager and HR Business Partner can help you understand your role’s range, how pay decisions are made, and what steps you can take to grow your impact and earnings over time.

Finally, we follow strong governance. The Board’s Compensation Committee oversees our programs, approves the metrics and guidelines used for executives, and ensures compliance with laws in <Country> and other locations where we operate. We maintain policies against hedging and pledging company stock, and we have a clawback policy for incentive pay in defined circumstances.

If you are a manager, your responsibilities include planning merit and bonus recommendations within your budget, providing timely performance feedback, and communicating decisions clearly and respectfully. You will receive calendars, tools, and training from HR to help you prepare and submit your recommendations accurately and on time.

If you have questions, please contact Total Rewards at <Email Address> or your HR Business Partner. We are committed to transparency and to making our pay programs understandable and fair.

Key Dates You Should Know

Annual performance reviews: <Month>
Bonus communication: <Month>
Merit increases take effect: <Date>
Annual equity grant notifications: <Month>
Open enrollment for benefits: <Month>

Important Reminders

Do not trade company stock during blackout periods. If you receive equity, you will be notified of applicable windows and restrictions.
Keep your personal information and tax details current to ensure accurate payroll and equity tax withholding.
This Charter describes governance at the Board level. It does not change your at-will employment status (where applicable) or create any guarantee of pay or employment.

End of document

Document Information:

Document Type: Compensation Committee Charter
Category: Compliance & Governance
Generated: August 28, 2025
Status: Sample Template
Next Review: <Insert Review Date>

Usage Instructions:

Replace all text in angle brackets < > with your company-specific information
Review all sections for applicability to your organization
Customize content to reflect your company's policies and local regulations
Have legal and HR leadership review before implementation
Update document header with your company's version control information
At bottom of the document you find a short example on how the content could be communicated to end-users, for instance employees.

This sample document is provided for reference only and should be customized to meet your organization's specific needs and local legal requirements.