Compensation Committee

Compensation Committee Charter
April 2003

Purpose
The Compensation Committee of BMC Software, Inc. is appointed by the Board of Directors to support the Board in fulfilling its oversight responsibilities relating to senior management performance, compensation and succession. In this regard, the Board and Compensation Committee align total compensation for the CEO and other senior executives with the long-term interests of stockholders.

Membership
The Compensation Committee will consist of three or more members of the Board. Every member of the Compensation Committee must meet the independence requirements of the New York Stock Exchange, any other regulatory requirements applicable to the Company and any additional independence requirements set forth in the Company’s Corporate Governance Guidelines. The members of the Compensation Committee may be replaced by the Board at any time.

Authority and Responsibilities

  1. The Compensation Committee has the sole authority to retain, compensate and terminate any compensation consultant to be used to assist in the evaluation of CEO or senior executive compensation.
  2. The Compensation Committee assists the Board in evaluating the CEO’s performance against goals and objectives previously determined by the full Board. The Compensation Committee proposes the CEO’s compensation levels to the full Board based on this evaluation. In determining the long-term incentive component of CEO compensation, the Compensation Committee considers the Company’s performance and shareholder return on a stand-alone basis and compared to peers, incentive awards to CEOs at comparable companies, and the awards given to the CEO in past years.
  3. The Compensation Committee annually reviews and evaluates Company performance, in light of goals and objectives set by the Board, and makes recommendations to the Board with respect to all compensation plans covering senior executives. This includes: (a) the annual base salary level, (b) the annual incentive opportunity level, (c) the long-term incentive opportunity level, (d) employment agreements, severance arrangements, and change in control agreements/provisions, and (e) any special or supplemental benefits or perquisites.
  4. The Compensation Committee administers the Company’s stock option plans and all plans designed to provide compensation primarily for officers of the Company.
  5. The Compensation Committee considers and reviews the compensation philosophy and the structure for compensation programs for senior executives against the background of those compensation programs covering the Company’s other personnel.
  6. The Compensation Committee assists the Board in identifying and periodically updating the qualities and characteristics necessary for an effective CEO and periodically monitors and reviews the development and progression of potential internal candidates against these standards for succession planning purposes.
  7. The Compensation Committee is responsible for producing a report on executive compensation for inclusion in the Company’s annual proxy statement.
  8. The Compensation Committee has the authority to retain and terminate advisors to assist in discharging its duties including the authority to approve such advisors’ fees and retention terms.
  9. The Compensation Committee provides a report of its meetings and activities to the full Board on a regular basis.

Organization

  1. The Compensation Committee meets on a regularly scheduled basis, at least quarterly and more frequently as necessary, to fulfill its responsibilities.
  2. A quorum of the Compensation Committee consists of a majority of its members. All actions of the Compensation Committee must be approved by a majority vote of the members present, unless there are only two members present, in which case such actions require a unanimous vote.
  3. Voting may be conducted verbally and the results, together with all other business conducted at each meeting, will be recorded in the minutes of the meeting.
  4. In conjunction with the Corporate Governance Committee and its evaluation process, the Compensation Committee annually reviews its own performance and the adequacy of this Charter.

Members of the Compensation Committee
Meldon K. Gafner, Chairman
Garland Cupp
L.W. Gray
Tom C. Tinsley