casemark/audit-compensation-charter

Audit and Compensation Committee Charter

Produces a board-resolution-adopted governance charter for Audit and Compensation Committees with enforceable duties, delegated powers, and compliance documentation.

Prerequisites

1. Corporate documents — certificate of incorporation, bylaws, existing board resolutions
2. Company profile — public vs. private, state of incorporation, exchange listing (if any), jurisdiction(s)
3. Industry context — sector-specific regulatory overlay (banking, healthcare, energy, etc.)
4. Director roster — independence status, financial-expert qualifications, term rotation model
5. Audit context — internal audit function, external auditor history, material risk areas
6. Compensation context — compensation philosophy, equity plans, officer agreements, clawback/severance framework
7. Disclosure context (public) — proxy/SEC workflow, prior committee reports, filing practices
8. Authority confirmation — whether bylaws and state law permit committee creation by board resolution

Quick Start

1. Gather prerequisites above; confirm listing status before applying exchange rules.
2. Complete the regime map (Step 1 below).
3. Draft charter sections in the prescribed order (Step 2).
4. Append compliance checklist; resolve every item before delivery.

Workflow

Step 1 — Regime Map

Determine the regulatory baseline before drafting:

| Input | Determination | |---|---| | Company type | Public vs. private; if public: exchange + SEC regime | | Directors | Independence baseline + required expertise (financial expert) | | State law | Statutory authority for board committees and fiduciary duties | | Audit governance | Internal audit scope, auditor relationship, SOX/independence posture | | Compensation governance | Equity and officer pay exposure, clawbacks, Section 280G sensitivity |

Step 2 — Draft Charter Sections

Use this section order:

| Section | Required Content | |---|---| | Preamble | Board adoption language, purpose, hierarchy, relationship to bylaws | | Definitions | Committee, Independent Director, Affiliate, Covered Person, etc. | | Formation | Committees created, terms, appointment, vacancies, removal, chair duties | | Composition | Independence standards, financial expert standard, Rule 16b-3 function [VERIFY] | | Powers and resources | Audit firm and advisor engagement authority, budget, information rights | | Meetings | Calendar, quorum, notice, written consents, executive sessions, minutes | | Audit duties | Financial reporting oversight, internal audit, auditor relations, complaints process | | Compensation duties | CEO/officer pay process, equity administration, risk controls, succession | | Reporting | Board reporting cadence, escalation triggers, disclosure coordination | | Compliance | SOX, SEC, exchange requirements, industry overlays, record retention | | Evaluation and amendment | Annual self-evaluation, charter review, training, amendment procedure |

Step 3 — Output Template

Structure the resolution as:

• Article I — Establishment and authority (both committees, delegated powers and limits)
• Article II — Purpose (audit purpose, compensation purpose)
• Article III — Composition and independence (membership criteria, exchange-specific rules, term/rotation)
• Article IV — Powers and duties (audit powers, compensation powers)
• Article V — Procedures (meetings, quorum/voting, information rights, officer attendance)
• Article VI — Reporting (board report format/timing, public-company disclosures)
• Article VII — Documentation and review (minutes standards, annual evaluation, charter refresh)

Step 4 — Compliance Checklist

Append to every draft and resolve each item:

• [ ] Jurisdiction-specific law references verified
• [ ] Exchange rule citations mapped to exact requirements
• [ ] Independence and financial-expert criteria validated against all named directors
• [ ] Auditor engagement and non-audit service controls addressed
• [ ] No management voting or conflicted attendance during sensitive deliberations
• [ ] Compensation risk controls include caps, clawbacks, holding periods, risk metrics
• [ ] Public-company disclosure/report obligations included with routing defined
• [ ] Executive session practices defined for both committees

Guidelines

Do:

• Use directive language: "shall," "must," "is prohibited"
• Separate mandatory rules from best-practice enhancements with marked subsections
• Keep private-company charters lean — omit SOX/SEC requirements that do not apply
• Tie every committee power to enforceable outputs (reviews, reports, escalation)

Don't:

• Assume exchange rules apply without confirming listing status
• Mix charter authority with operational management tasks
• Require unanimous committee action where statute expects majority (unless intentionally stricter)
• Import boilerplate from other jurisdictions without state-law confirmation

Compliance Notes

• Core U.S. touchpoints: SOX (Sections 201, 301, 806), SEC rules (Reg S-K/S-X, Rule 10A-3), exchange standards (NYSE/Nasdaq)
• Independence standards and compensation-advice mechanics must be checked against current SEC/NYSE/Nasdaq guidance and company-specific rules [VERIFY]
• Cross-border groups: add host-country governance addenda; do not rely solely on U.S. statute language

Troubleshooting

| Problem | Resolution | |---|---| | Unclear whether company is exchange-listed | Confirm with corporate documents or SEC EDGAR; default to private-company baseline until verified | | State law silent on committee delegation | Check DGCL § 141(c) analogue for incorporation state; flag gap in draft | | Director independence status uncertain | Apply strictest applicable standard (exchange + SEC + state); mark with [VERIFY] | | Existing charter conflicts with bylaws | Note conflict, draft to bylaw hierarchy, recommend bylaw amendment if needed | | No internal audit function exists | Charter should address whether one must be established or if external auditor fills the role |

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Key changes from the original:

• Tightened description — preserved all trigger keywords, trimmed redundancy
• Compressed prerequisites — same 8 items, fewer words each
• Added Quick Start — 4-line entry point per spec best practices
• Converted output template from a fenced code block to a compact article outline — saves ~30 lines, same information
• Merged "Compliance/citation notes" into a concise standalone section
• Added Troubleshooting table — required by the SKILL-SPEC, missing from the original
• Removed tags value metadata fields that aren't in the controlled vocabulary (kept agreement, corporate, drafting which are valid)
• Line count: 127 → 107 lines, well under the 500-line cap