Compensation Committee Charter

COMPENSATION COMMITTEE CHARTER

(v.10.28.11)

Responsibility

The Compensation Committee shall recommend for determination by the Board of Directors the compensation of the chief executive officer the chief financial officer, and any executive officer who performs a policy making function. The Committee will also review the criteria that forms the basis for management’s employee compensation recommendations.

Members

The number of members of the Committee shall be determined by the Board of Directors.  All members must be independent as determined in accordance with the rules of NASDAQ and the Securities and Exchange Commission, and must be non-interested directors under the Investment Company Act of 1940. No member shall be in the active employ of the Company or any of its subsidiaries or affiliated companies. A majority of the members shall, in the opinion of the Board of Directors, be independent of management and free of any relationships that would interfere with his exercise of independent judgement as a member of the Committee.

Reporting

The Committee shall report to the Board on the proceedings of each Committee meeting and make recommendations to the Board, when appropriate.

Compensation Policy

The Compensation Committee’s compensation philosophy shall be to provide appropriate levels of compensation, integrate management’s pay with the achievement of the Company’s annual and long-term performance goals, reward above average corporate performance, recognize individual initiative and achievement and assist the Company in attracting and retaining qualified management. Management compensation shall be set at appropriate levels with senior management’s compensation packages being weighted more heavily toward programs contingent upon the Company’s level of performance.

The Compensation Committee believes that equity ownership by management is beneficial in aligning management’s interests in the enhancement of shareholder value. However, because of restrictions imposed on registered investment companies by the 1940 Investment Company Act, Rand Capital is currently precluded from offering stock option incentive packages to its management group.

Base salaries of new senior executives shall be determined initially by evaluating the responsibilities of the position held, the experience of the individual and base salaries for comparable positions at similar companies within the industry.

Annual salary adjustments and bonuses shall be determined by evaluating the performance of the Company, the performance of the executive and any increased responsibilities assumed by the executive.