The intense scrutiny of executive compensation at public companies has spilled over to the tax-exempt world, with non-profit pay practices now similarly regarded as a litmus test of good governance and Director independence. Many tax-exempts have made incremental program changes to address challenging economic conditions, new regulatory needs, and increased governance expectations.
However, more robust, proactive changes can better ground compensation practices according to the strategies and needs of non-profits. These Compensation Committees should consider the following actions:
- Revisit Your Executive Compensation Strategy and Philosophy
- Address Potential "Red Flag" Practices
- Take Advantage of Improved Form 990 Reporting
- Validate and, Where Needed, Clarify the Role of Variable Pay
- Validate Compliance with Section 4958 of the Internal Revenue Code
- Strengthen Governance
- Create a More Rigorous CEO Evaluation Process
- Assess Executive Benefits
- Evaluate the Adequacy and Independence of Compensation Advice
- Prepare for the Recovery