What more simplified pay structure With a flexible

What is Executive Compensation?

Executive
compensation refers to the benefits paid to executive positions and the
management team (Demirer & Ilhan, 2013). The manner in which the dependence
of compensation on firm performance is structured can have a significant effect
on the added value that the executive brings to the firm. Excessive or poorly
structured compensation arrangements have been blamed for the U.S. financial
crisis of 2008 (Samuelson & Stout, 2009).

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Components and Trends

Executive compensation generally
consists of a mix of four components (Eisenhardt, 1989):

1.       Annual base salary

The standard wage paid to an
executive that typically is the largest share of an annual compensation
package.

2.       Annual incentive or bonus plan

These are generally tied to
short-term performance measures. Distributions for annual milestones or
reaching incentivized goals that are typically cash-based.

3.       Long-term incentives

Consisting of a mix of restricted
stock, stock options and other long-term performance plans tied to total
shareholder return or financial performance, vehicles used to share long-term
value creation with employees. These are often tied to equity or enterprise
value.

4.       Perquisites / Benefits plan

Non-cash compensation provided to
an employee on an annual basis. These typically include elements like health
and life insurance, defined benefit or contribution plans, and paid vacations.

New Way of Pay

Over the years, organizations have
been increasingly linking their variable pay plans to individuals, teams and
organizational performance, such as individual or team performance based profit
sharing, productivity based incentives, stock options and ownership and other
customized schemes.

Organizations with strategically
aligned variable compensation have experienced a positive impact on individual
as well as organizational performance

Companies have leveraged the
variable pay to aggressively position their top performer at the top end of the
market.

New & emerging sectors like
retail, telecom, aviation with younger employees are adopting a more simplified
pay structure

With a flexible pay structure
employees can choose from defined items of pay and optimize their own tax
planning.