The Development of Corporate and Committee Charters
A key component in board governance
In light of the Sarbanes-Oxley Act and the importance of independent, sound corporate governance, it is key for companies to establish written charters to govern the practices of the board and its committees. A company cannot have good governance without the development of good charters.
As L&A conducts its audits of these charters, we find the majority of compensation and human resource charters to not be appropriate for the company today. Compensation programs tend to go astray where committees have out-of-date charters or none at all, and therefore are not working toward a desired goal. Although committee members may come and go, a solidly developed charter can serve to govern with consistency and maintain the right relationship between the human resources department and the compensation committee.