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Company Overview

Compensation Policy

INTRODUCTION
The independent members (the "Independent Members") of the Board of Directors (the "Board") of Hoku Scientific, Inc., (the "Company"), as independence is defined by The Nasdaq Stock Market, Inc. Listing Standards shall be responsible for (i) reviewing and approving the compensation of the Company's Chief Executive Officer, (ii) reviewing and approving the compensation of the Company's executive officers, (iii) reviewing the Company's overall compensation policies, plans and programs, and (iv) performing other activities related to the Company's compensation plans and structure, including preparing and reviewing the report included in the annual proxy statement in accordance with applicable rules and regulations promulgated by the United States Securities and Exchange Commission (the "SEC"). The term "compensation" shall include salary, long-term incentives, bonuses, perquisites, equity incentives, severance arrangements and other benefits and any other rights or compensation received under the Company's benefit plans. The goal of the Company's compensation policies, plans and programs shall be to attract and retain outstanding officers, directors and employees. Any action required to be approved by the Independent Members pursuant to this policy, the rules or regulations of The Nasdaq Stock Market, Inc. or the SEC shall require the approval of least a majority of such Independent Members then serving as members of the Board.
II. RESPONSIBILITIES
1. CEO Compensation: The Independent Members shall review and approve, the salary, bonus, equity compensation and any other compensation and terms of employment of the Company's Chief Executive Officer. In determining the compensation of the Chief Executive Officer the Independent Members shall consider the Company's short-term and long-term performance goals and metrics to measure achievement of such goals, in light of the Independent Members' determination of the appropriate means of motivating the Chief Executive Officer. The Independent Members may consider the Company's performance and relative stockholder return, the value of similar incentive awards given to chief executive officers of comparable companies and previous awards given to the Company's Chief Executive Officer.
2. Compensation of Executive Officers: The Independent Members shall review, modify (as needed) and approve the salary levels, bonus plans and structures and payments thereunder and other forms of compensation policies, plans and programs for executive officers of the Company, as appropriate, including, in its discretion:
a. reviewing and approving corporate performance goals, the structure and method for determining the terms of overall executive bonus or other compensatory plans, method of determination of individual goals for executive officers thereunder, and payment of individual executive bonuses to the extend such bonuses contain a discretionary component;
b. reviewing national and industry-wide executive compensation practices and trends to assess the adequacy and competitiveness of the Company's executive compensation programs among comparable companies as well as the appropriateness of such programs; and
c. reviewing and approving the terms of any employment agreements, severance arrangements, change of control protections and any other compensatory arrangements.
3. Overall Company Compensation: The Independent Members shall review, modify (as needed) and approve the Company's overall compensation plans and structure, including without limitation equity and bonus compensation programs.
4. Independent Director Compensation: The Independent Members shall recommend to the Board the compensation for Independent Members, including any retainer, committee and committee chair fees and/or equity compensation. Such recommendation shall take into account national and industry-wide compensation practices and trends and a comparison of the Company's compensation programs among comparable companies as well as the appropriateness of such programs in light of corporate governance standards and the Independent Members' determination of the appropriate method of motivating the Independent Members.
5. Administration of Plans: The Board shall retain full power and authority to administer the Company's stock option plans, stock appreciation rights plans, pension and profit sharing plans, stock bonus plans, stock purchase plans, bonus plans, deferred compensation plans and similar programs, including the adoption, amendment and termination of such plans and any sub plans thereof, establishing guidelines, interpreting plan documents, selecting participants, approving grants and awards, exercising such other power and authority as may be permitted or required under such plans or delegating such authority to a subcommittee.
6. SEC Report: The Independent Members shall prepare any report required by the applicable SEC rules and regulations to be included in the Company's annual proxy statement.
7. Policy Statement: The Independent Members shall review, discuss and assess periodically its own performance as well as the Independent Members' roles and responsibilities as outlined in this statement of policy. The Independent Members shall submit any suggested changes to the Board for its consideration.

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