Executive Compensation and the Role of the Compensation Committee

COMPLIANCE

The Internal Revenue Service (IRS), Financial Accounting Standards Board (FASB), and Securities and Exchange Commission (SEC) have rules regulations that provide guidance and limits to executive compensation practices from a tax code, accounting standards, and shareholders' interest perspective. These regulatory bodies strive to align executive compensation packages to the executive's performance and provide some financial control parameters. The following regulations have the most impact on executive compensation:

Taxes: These regulations affect the deductibility and expensing of executive compensation, reporting, and deferral of taxable income.

• IRC 162(m)
• IRC 409A

SEC: Board members and employees who participate in equity employer benefit plans are covered by the related SEC regulations.

• Regulation S-K 402
• Dodd Frank Act

GAAP: Accounting standards that directly affect the compensation costs a corporation needs to expense as it pertains to "potential" compensation earned from equity awards.

• Topic 718