Preface -

The duties imposed on compensation committees of publicly traded companies have evolved and grown over time. This first edition of the Compensation Committee Handbook from the lawyers of the Executive Compensation and Benefits group at Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates is intended to help compensation committee members understand and comply with the duties imposed upon them. We have also undertaken to describe in some detail the concepts underlying a variety of areas within the bailiwick of compensation committees (for instance, the types of equity awards that are commonly granted and their respective tax treatment) and to provide our perspective on some of the many decisions that compensation committees must make (for instance, the pros and cons of hiring a compensation consultant and the factors that go into that hiring decision).

In short, we hope that this Handbook will help compensation committee members understand their responsibilities and how best to discharge them.

We deliberately wrote this Handbook in a non-technical manner. We intend it to be something to read, not something to parse — more of a “how to” guide than a reference source for arcane rules. With that said, some of the chapters deal with technical rules, and at some length, where we think it is essential for compensation committee members to appreciate them.

Precisely because so many of the applicable rules are technical and complex and because the circumstances addressed by compensation committees are often nuanced to begin with, it is important to recognize that this Handbook has limitations, in part again due to our non-technical approach to writing it. As such, compensation committee members should not expect this Handbook to be an exhaustive compliance manual.

Indeed, in some places, this Handbook may even raise questions, not answer them. We hope so, because that means we achieved what we set out to do — to help compensation committee members think in a fresh way about what they are charged with doing and why.

This Handbook focuses on considerations for publicly traded companies and specifically those listed on the NYSE or Nasdaq. Many of the principles discussed have broader application, however.

We expect that this Handbook will evolve over time to address developments in the legal and commercial landscape applicable to compensation committee responsibilities.