20 questions directors should ask about executive compensation

Also available in French under the title "20 questions que les administrateurs devraient poser sur la rémunération des cadres"

Questions

1. Does the compensation philosophy support the strategic direction of the organization?
2. Does the board understand and approve the level of risk inherent in the organization’s compensation philosophy?
3. Is the issue of executive compensation integrated into board discussions about risk? 
4. How effectively do we engage with shareholders regarding executive compensation? 
5. How well do we understand the senior management team in terms of motivators, risk appetite and relationships?
6. Does our compensation disclosure adequately address the issues of primary concern to our shareholders?
7. How can we assess whether the organization’s pay practices are both defensible and competitive? 
8. Do we understand the process used to develop the compensation program? Are we confident in the methods used? 
9. Do the performance measures and standards selected accurately capture the performance that pay should be linked to?
10. Does the board understand the complete range of potential payouts under the incentive structure, and are we satisfied that they are reasonable?
11. Does the use of mid and long-term incentives appropriately balance risk and reward, shareholder alignment and management engagement? 
12. How could the design of our stock options be improved in order to improve alignment between management and shareholders or manage risk?
13. How do our share ownership guidelines compare to developing best practices and regulatory requirements?
14. Would a clawback policy be an effective way to manage compensation risk in our organization?
15. How will executive benefits such as pensions and perks hold up under scrutiny from shareholders? 
16. Are the board and CEO in agreement over the organization’s approach to executive compensation?
17. How effective has our executive compensation program been thus far in terms of motivating and paying for the desired performance?
18. What compensation-related risks have affected our organization or others in our industry?
19. What is the potential payout under the most extreme scenario? Is it justifiable?
20. What risks do we need to monitor on an ongoing basis?