compensation committee

A committee of a board of directors that sets the compensation level of senior management. In addition to salary, the compensation committee determines the level of stock option compensation and stock warrants. Under the 2002 Sarbanes-Oxley legislation, members of the compensation committee all have to be independent directors by the middle of 2004. If a company is controlled by another company, it is not subject to the full independence requirement. The compensation committee also must have a charter specifying its purpose and the evaluation procedures of the committee.