The director compensation plan is created by a business institute for the purpose of retaining and compensating members of the Board of Directors through ownership interest in the stock of the company and other compensatory modes. This plan is created to ensure benefits not only for the directors but also for the company and its shareholders by allowing the directors share of the stocks and shares of the company. The compensation plan is created only for non-employee directors who are not part of the managerial, financial or any other business activity within the company. The compensation amount promised can be subject to revision as per the profit and loss circumstances of the company.
- The exact percentage of Common stock that the director is entitles to must be stated.
- There should also be proper provisions made incase of retirement of any director.
- The compensation plan is applicable only to active non-employee director participants.
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