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Old/Additional ID: Technical Update—May 6, 2014: Regulation cites and FCA contacts
· Authorizes the compensation committee to hire, retain, and terminate external advisers and/or outside legal counsel needed to assist the committee in performing its duties. These professionals should work directly for, and report directly to, the committee and be independent of senior management (i.e., no personal or other professional relationships with senior management);3
· Authorizes the committee's direct access to any advisers that management uses on compensation programs or practices;
· Provides for the committee’s easy and ready access to institution resources and personnel, particularly senior officers and managers with human resources responsibilities, to obtain needed information and gain the best overall understanding of the compensation program; and
· Requires the compensation committee to remain accountable, and report only, to the board.
· Consult with, or employ as needed, professionals and/or external legal counsel who are independent of senior management and who bring the necessary perspective and expertise to work directly with the compensation committee on compensation-related issues;
· Fully analyze and justify the long-term liability to the institution in developing compensation packages and fully understand the financial commitment and total cost to the institution. Use appropriate analysis and metrics to develop a complete understanding of the full effects of the compensation package as it pertains to the chief executive officer and individual senior officers (all the elements of annual pay, long-term pay, severance benefits, and all other compensation);
· Ensure an appropriate linkage of pay to performance to ensure that total compensation packages are meaningful relative to the institution's long-term financial outcomes;
· Carefully evaluate incentive programs and ensure that incentive payments are based on the institution's long-term financial performance, are consistent with prudent risk-taking, and produce safe and sound outcomes;
· Ensure incentive programs align the interests of senior officers and employees with the long-term financial health of the institution (e.g., do not give undue weight to factors such as loan growth without also considering asset quality, profitability, and financial performance factors);
· Ensure that retirement benefits are appropriate and not excessive in light of bonus programs and other compensation already paid to executive officers;
· Ensure pension programs are appropriately structured to attract, retain, and reward staff, and that pension programs are appropriately funded; and
· Fully understand key assumptions used to calculate compensation and pension plan obligations, such as assumptions used for present value calculations, as well as the sensitivity of your institution's financial exposure to such assumptions.
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