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Product Overview: Compliance PARTNER, Executive Compensation®
Step 1: Planning and Readiness Assessment
In order to minimize the time and investment involved in disclosing your executive compensation properly, you will first need to determine what your starting point is and what needs to be done to fulfill your disclosure obligations.
Compliance PARTNER, Executive Compensation® assistance at this stage:
- Understand the regulatory requirements
- Determine if you have a disclosure infrastructure in place
- Determine what the roles are of the people involved in establishing and disclosing compensation (HR, Accounting, Finance, and Compensation Committee) and whom the players are
- Determine if your sub-systems are capable of the tracking required compensation elements
- Perform a trial run with your existing Executive Compensation information and perform a gap analysis to determine what elements you are missing
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Lessons from SEC filers:
- Start early and allow enough time for planning and gap remediation
- Effective planning and readiness assessment is a weak point in many companies, resulting in wasted effort, unnecessary confusion and duplication of efforts
- If possible, adhere to a logical, well laid out work-flow
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Step 2: Documentation
Any project on this scale will require a significant amount of work with documentation input from across the organization. Some companies have up to 150 compensation elements to consider, and documenting all this information is no small task.
Compliance PARTNER, Internal Controls® assistance at this stage:
- Determine which compensation elements will need to be documented
- Verify which parts of the organization will need to furnish information
- Set up a central location to keep all of these files
- Create documentation where it does not exist
- Assess segregation of duties problem areas
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Lessons from SEC filers:
- Get inter-departmental buy-in early so that information is provided readily
- Develop some kind of way to present this documentation holistically for upper management, the compensation committee, the audit committee and the board of directors
- Invest in tools that easily update documentation to make the project more sustainable
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Step 3: Drafting
This is the point in the process where your disclosure piece takes form. The new requirements require six (6) forms for each Named Executive Officer and five (5) forms for directors in addition to drafting your new CD&A, which is similar in scope to the Management Discussion and Analysis.
Compliance PARTNER, Internal Controls assistance at this stage:
- Identify the NEOs whose compensation will be disclosed
- Create your Summary Compensation table and all of the necessary linked sub-tables
- Create drafts of narratives that summarize your executive compensation decisions
- Write a draft of your Compensation Discussion and Analysis Use automated tools to allow for adequate reporting
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Lessons from SEC filers:
- Base your drafts on best practices templates where possible
- Ensure you disclose information and tables that cascade into your Summary Compensation Tables
- Do not skip any elements in the Summary Compensation Table unless your company is allowed to
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Setp 4: Disclosure and Sustainability
Most companies need to go through an extensive approval and sign off process prior to disclosing executive compensation. The Compliance Intranet option, push of a button reporting and flow charting help you communicate with the compensation committee, board of directors and other parties.
- All internal stakeholders must be given their chance to provide input
- Ensure that all the information that rolls into your disclosure is easily sustainable
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Lessons from SEC filers:
- Have your draft disclosure and project information in such a way that it is easily reviewed by compensation committee, accounting, HR and finance stakeholders
- Maintain your disclosure information in an easily sustainable format
- Since executive compensation disclosure is an ongoing requirement, ensure related materials are constantly updated to reflect ongoing compensation changes
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