casemark/audit-compensation-committee-charter

Audit & Compensation Committee Charter

Draft a single charter establishing Audit and Compensation Committees with compliant authority, composition, and duties.

Gather Inputs

1. Company status (public / private / pre-IPO) and exchange (NYSE, NASDAQ, OTC, none).
2. State of incorporation and governance statute constraints (e.g., DGCL 141(c) [VERIFY]).
3. Existing charter, bylaws, committee charters, or board resolutions.
4. Board size, desired committee size, and applicable independence standard.
5. Auditor relationship, internal audit status, and financial reporting timeline.
6. Executive compensation structure, equity plans, employment/severance agreements.
7. Industry-specific regulatory overlays (financial services, healthcare, energy).
8. Whistleblower/compliance channels and meeting cadence expectations.

Charter Sections

| Section | Content | |---|---| | Adoption & Authority | Board adoption statement, effective date, delegated authority; board retains ultimate fiduciary authority | | Committee Structure | Separate Audit and Compensation Committees as standing committees | | Membership & Independence | Minimum members, independence tests, appointment process, chair designation, term/rotation | | Authority & Resources | Sole authority to retain advisors, funding, access to records/personnel, investigation authority | | Meetings & Minutes | Quorum, voting, written consent limits, minutes, executive sessions | | Responsibilities | Detailed duties per committee (see checklists below) | | Reporting | Board reporting cadence, escalation triggers, required public reports | | Evaluation & Review | Annual self-assessment, annual charter review, amendment process |

Audit Committee Responsibilities

• Oversee financial statement integrity (annual and quarterly)
• Review critical accounting policies, estimates, and alternative treatments
• Appoint, compensate, oversee, and terminate the independent auditor
• Pre-approve audit and permissible non-audit services; document chair delegation
• Receive auditor communications under PCAOB standards
• Evaluate auditor independence and quality controls annually
• Oversee internal audit charter, plan, budget, staffing, and IA head
• Oversee ICFR and remediation of deficiencies
• Establish whistleblower procedures for accounting/auditing concerns (SOX 301)
• Review related-party transactions and disclosure process
• Oversee compliance/legal risks material to financial statements
• Review ERM for financial and reporting risks
• Hold private sessions with independent auditor and internal audit annually

Compensation Committee Responsibilities

• Establish and annually review compensation philosophy
• Set CEO goals, evaluate performance, determine CEO pay in executive session
• Approve/ratify compensation for other executive officers
• Approve employment agreements, severance, CIC provisions, special compensation
• Administer equity plans; approve grants with timing and MNPI safeguards
• Assess compensation-related risk and mitigation (caps, clawbacks, holding periods)
• Oversee executive succession planning and leadership development
• Retain and evaluate independent compensation advisors; assess independence factors
• Meet with compensation consultant annually without management present

Public Company Add-Ons

| Topic | Requirement | |---|---| | Audit independence | SEC Rule 10A-3; no compensatory fees; no affiliates | | Financial expert | At least one audit committee financial expert (Reg S-K); disclose | | SOX authority | Sections 201, 206, 301, 806 (non-audit services, rotation, whistleblower) | | Comp committee independence | NYSE/NASDAQ standards; consultant independence factors | | Equity awards | Rule 16b-3 non-employee director approvals | | Tax deductibility | IRC 162(m) outside director concepts if still applicable [VERIFY] | | Proxy disclosures | Audit Committee Report; Comp Committee Report; CD&A review | | Charter availability | Post on website; include in filings per exchange/SEC rules |

Template Skeleton

[Company Name] Board Committee Charter
Adopted: [Date]

I. Authority
Board adopts this Charter pursuant to [Bylaws/State Law]. Audit and Compensation Committees are standing committees. Board retains ultimate fiduciary authority.

II. Membership
A. Audit: [#] independent directors meeting [NYSE/NASDAQ/10A-3] standards; ≥1 financial expert.
B. Compensation: [#] independent directors meeting [NYSE/NASDAQ] standards; Rule 16b-3 compliance.

III. Meetings & Procedures
Quorum: majority. Actions: majority vote or unanimous written consent. Executive sessions required. Minutes maintained.

IV. Authority & Resources
Each committee may retain independent advisors; Company provides funding. Full access to records and personnel.

V. Audit Committee Responsibilities
[Tailored from checklist]

VI. Compensation Committee Responsibilities
[Tailored from checklist]

VII. Reporting
Chairs report to Board after each meeting; escalate material issues promptly.

VIII. Evaluation & Charter Review
Annual self-assessment and charter review; amendments require Board approval.

Pitfalls & Checks

• Default to the strictest independence standard when multiple exchanges apply.
• For private companies, remove public-company disclosures; substitute best-practice equivalents.
• Keep CEO absent from deliberations on their own compensation; document executive sessions.
• Confirm 409A compliance for severance and deferred compensation provisions.
• Keep obligations realistic and auditable — avoid over-promising committee activities.
• Align defined terms and cross-references with bylaws and board authority limits.
• Mark uncertain citations [VERIFY] and resolve before final delivery.