Compensation Considerations for Director Service on Special Committees

The role of a board director in any publicly traded company is inherently demanding, involving oversight of complex and critical issues that ensure the company’s longevity and success. The formation of special committees to address specific, oftentemporary, issues is a common duty among these responsibilities.

These special committees are established in addition to typical standing committees like the audit, compensation, and nominating/governance committees, and they often require significant additional time and effort from their members, necessitating a careful examination of appropriate compensation levels. There are several issues to consider when allotting compensation for special committee service, including the need for fairness, a recognition of the committee’s workload, and alignment with market practices.

UNDERSTANDING SPECIAL COMMITTEES
Special committees are formed to tackle specific tasks that fall outside the purview of standing committees. These tasks often include mergers and acquisitions (M&A), internal investigations, strategy realignment, litigation support, a CEO search, and other high-stakes matters that demand focused attention and expertise. These temporary committees are set up to address situations where existing board structures are insufficient to manage the workload, or where a potential conflict of interest might be present, such as a CEO-led management buyout.