Compensation of senior executives is governed by board process, disclosure obligations and advisory shareholder votes.
Compensation committee. Independent members, with authority to retain advisers and responsibility for their independence assessment, operating under a charter.
Peer group selection is the single most consequential methodological choice and is scrutinised by proxy advisers.
Disclosure. A compensation discussion and analysis explaining the philosophy, the elements, the performance measures and the decisions; tabular disclosure; pay versus performance disclosure; and the pay ratio.
Advisory votes on compensation at defined intervals, and on the frequency of those votes. A low support level is not binding and reliably produces engagement, proxy adviser attention and changes.
Clawback policies required by listing standards, recovering erroneously awarded incentive compensation following a restatement, without regard to fault.
Hedging and pledging disclosure and, commonly, prohibition.
Perquisites disclosure at a low threshold, and the recurring source of enforcement for disclosure failures.
Private company relevance. The same governance structure — an independent process, market data, documented rationale — is what defends compensation decisions in a closely held company against an oppression claim.