Discuss with management and the independent auditor the annual and quarterly

Discuss with management and the independent auditor

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• Discuss with management and the independent auditor the annual and quarterly finan- cial statements, earnings results, earnings guidance. Compensation Committee • Review and recommend re- muneration arrangements for the senior management, in- cluding the CEO. • Ensure that the organiza- tion’s compensation plans are appropriate to allow attraction and retention of the best tal- ent in the market. • Ensure that there is no loss of value for the shareholders due to overly generous com- pensation. Decide on the structure of the compensation plans (restricted stocks, op- tions, bonuses etc.). Decide on the incentive strategy (short-term vs. long term per- formance targets). Nominating Committee • Identify appropriate candi- dates in the event of a board vacancy. • Review and recommend to the board the criteria for a board membership and the desired competencies of board members. • Oversee the evaluation of the performance of the board and the management, includ- ing the CEO. ONE NEW MODEL: BOARD COMMITTEES’ RESPONSIBILITIES 29
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JOINING FORCES MIT SLOAN MANAGEMENT REVIEW 17 on the subject of the board’s role in overseeing corporate responsibility and sustainability … In view of growing concern about business and sustainability, and given the importance of corporate responsibility for ongoing value cre- ation, directors should be asking whether their board’s oversight in those areas is sufficient. 32 Because short-termism is deeply entrenched in capi- tal markets, it is no small matter to fight it in the boardroom. MIT professor Robert G. Eccles has de- veloped a promising approach that may help reduce the focus on maximizing shareholder concerns so boards can think broadly and act deliberately about both long-term and short-term issues. In his recent book, The Integrated Reporting Movement (with Mi- chael P. Krzus), Eccles argues that boards should articulate a meaningful story about which stake- holders and material risks are most important to the company’s long-term goals, and communicate that story to the markets. 33 Eccles further comments: Companies don’t have to be beholden to short- termism. The first thing they can do is to have their board issue an annual Statement of Sig- nificant Audiences and Materiality, in which they outline the relative importance of differ- ent types of shareholders and stakeholders in relationship to each other. This statement would also outline the timeframes the com- pany uses in making decisions relevant to each audience. Since boards represent the corpora- tion, and not just shareholders — which is the common misperception — it would be good governance for them to issue such a statement so that everybody knows the role they see for the company in society. To help develop this idea, I’m working with both the UN Global Compact and the Princi- ples for Responsible Investment. One way to address it is by incorporating this idea in the new Board Program developed by the UN Global Compact, which is a series of sessions with boards of directors to help them shape their companies’ sustainable strategies.
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