Compensation Committee Handbook.

• Author: Davis, Michael L.
• Position: Director Library

By James F. Reda

Published by John Wiley & Sons Inc., New York, 358 pages, $60.00

JIM REDA's NEW BOOK is different than virtually all other executive compensation texts written during the last two decades in that it is written specifically for compensation committee members. Reda, a seasoned executive compensation expert (now compensation practice leader with Buck Consultants Inc.), put himself in the shoes of a compensation committee member, and asked, "What would I need to know to do my job well?" The answer to this question became the outline for The Compensation Committee Handbook.

Executive compensation has always been part art and part science. Reda's approach to The Compensation Committee Handbook recognizes this dichotomy. He approaches the "science" side of executive pay throughout the book. A good portion of the book gives detailed background information on the key parts of an executive compensation program, the role of a compensation committee, how to select and train new committee members, how to organize and run a committee, and legal and regulatory issues surrounding executive compensation and the compensation committee. He also includes a 45-page glossary that defines most of the technical terms used by a compensation committee, and a series of technical appendices that are useful reference documents for a committee member.

He covers the "art" side as well throughout the book and in a special section dedicated to five somewhat vexing contemporary issues faced by many compensation committees. The current issues section explains and discusses three issues related to stock: repricing of underwater stock options, using reload stock options (a special form of stock option), and accounting for stock awards. He also includes a section discussing the intricacies of accounting for a business combination using pooling of interests accounting, and, lastly, a section reviewing various aspects of executive employment contracts.

Of special interest, and what makes Reda's book different than other executive compensation texts, is that he devotes seven of his 12 chapters to the compensation committee itself. His opening line in the first chapter states, "One of the most important factors in the best-performing companies is the quality of the compensation committee." Reda makes it clear that good compensation committees do not happen by accident, and he goes to great length to share what he and others think makes for a good committee. Reda...