James provides a step by step methodology that insures best practices, avoids a conflict of interest and, by providing proprietary data about industry comparables, creates a “safe harbor” for the board and executive while reducing the bad publicity because of the appearance of excess compensation.
Develop a compensation philosophy for board approval
– Assure compliance with safe harbor components as described in intermediate sanctions
– Form a compensation committee
– Insure no conflict of interest exists among members of the committee – none of board members have any direct relationship with those whose compensation they are setting
– Use compensation benchmarking to demonstrate reasonable compensation