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Simple English definitions for legal terms
compensation committee
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A quick definition of compensation committee:
Compensation Committee: A group of people who work for a company and are responsible for deciding how much money the company's leaders should be paid. They make sure that the pay is fair and reasonable. The government requires that public companies have a compensation committee made up of independent members who are not connected to the company in any way.
A more thorough explanation:
The compensation committee is a group of people who are part of a company's board of directors. They are responsible for reviewing and approving the pay and benefits of a company's top executives, such as the CEO and CFO.
For example, if a company's CEO is up for a raise, the compensation committee would review their performance and decide whether or not to approve the raise.
The Securities and Exchange Commission (SEC) has a rule called 10C-1 that requires public companies to have independent compensation committees. This means that the committee members cannot be affiliated with the company and must be paid by an independent source.
Overall, the compensation committee plays an important role in ensuring that a company's top executives are fairly compensated for their work.