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    Executive Compensation Plan

    Uploaded by

    Barsha Chatterjee
    The document discusses executive compensation, outlining its key components. It notes that executive pay is determined by job complexity, the employer's ability to pay, and the executive's skills. Compensation typically includes a basic salary plus bonuses, short-term incentives for annual goals, long-term incentives for multi-year goals, benefits, and stock plans. Additional elements are deferred compensation, supplemental retirement plans, golden parachutes for ownership changes, and golden handcuffs to encourage retention. An example compensation package totals $29 million including salary, bonuses, incentives, medical benefits, deferred pay, stock, and pension.

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    Executive Compensation Plan

    Uploaded by

    Barsha Chatterjee
    47 views2 pages
    The document discusses executive compensation, outlining its key components. It notes that executive pay is determined by job complexity, the employer's ability to pay, and the executive's skills. Compensation typically includes a basic salary plus bonuses, short-term incentives for annual goals, long-term incentives for multi-year goals, benefits, and stock plans. Additional elements are deferred compensation, supplemental retirement plans, golden parachutes for ownership changes, and golden handcuffs to encourage retention. An example compensation package totals $29 million including salary, bonuses, incentives, medical benefits, deferred pay, stock, and pension.

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    The document discusses executive compensation, outlining its key components. It notes that executive pay is determined by job complexity, the employer's ability to pay, and the executive's skills. Compensation typically includes a basic salary plus bonuses, short-term incentives for annual goals, long-term incentives for multi-year goals, benefits, and stock plans. Additional elements are deferred compensation, supplemental retirement plans, golden parachutes for ownership changes, and golden handcuffs to encourage retention. An example compensation package totals $29 million including salary, bonuses, incentives, medical benefits, deferred pay, stock, and pension.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    47 views2 pages

    Executive Compensation Plan

    Uploaded by

    Barsha Chatterjee
    The document discusses executive compensation, outlining its key components. It notes that executive pay is determined by job complexity, the employer's ability to pay, and the executive's skills. Compensation typically includes a basic salary plus bonuses, short-term incentives for annual goals, long-term incentives for multi-year goals, benefits, and stock plans. Additional elements are deferred compensation, supplemental retirement plans, golden parachutes for ownership changes, and golden handcuffs to encourage retention. An example compensation package totals $29 million including salary, bonuses, incentives, medical benefits, deferred pay, stock, and pension.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    Executive Compensation Plan

    Submitted by Barsha Chatterjee(27040)


    Introduction:

    The executive pay has become a contentious topic recently. A study concluded that three main
    factors such as job complexity, employer’s ability to pay and executive’s human capital accounted
    for the executive’s two third variable pay. External equity plays a big role in determining an
    executive’s pay plan. The organization analyses the top executive’s pay for “peer companies” in
    same industry to set up pay plans for their executives.

    The basic approach adopted to evaluate the compensation of executive jobs is to segregate them in
    grades each with a basic salary range. Firms also use point method and job classification with
    compensable factors such as: Position scope, complexity and difficulty.

    Executive Compensation Components:

    Compensation of the top executives consists of below elements:

    1. Basic Pay: This is the “fixed” element of the pay and does not vary with the company
    performance,
    2. Bonus: This is one time payment to reward the executive as an appreciation for achieving a
    specific goal.
    3. Short term incentives: short term incentives are awarded annually. It is cash or stock bonus
    for achieving a target towards the strategic goals of the organization.
    4. Long term incentives: Long-term incentives generally refer to grants or awards where the
    payment is based on performance for a period beyond one year. It encourages the
    executives to take up tasks that will increase the value of the stocks of the firm.
    5. Executive benefits and perks: include things like company car, club membership,
    supplemental executive retirement pension in one year.
    6. Stock Plans: Incentive stock options and restricted stock grants are two other forms of
    longer-term incentive plans employers use to give executives an opportunity for significant
    additional compensation. 

    Other Additional Components:

    1. Deferred compensations: The plan usually credits interest to the deferrals, which allows
    executives to maximize tax-deferred growth and take their total earnings over an extended
    period of time. Executives can choose to defer a significant amount of their salary or bonus
    and write their own pre- and post-retirement options.
    2. Supplemental executive retirement pension: One example of a nonqualified benefits plan is
    a supplemental executive retirement plan. The SERP provides retirement benefits that may
    not be provided through the employer's regular retirement plan because the level of
    benefits would cause the plan to violate non-discrimination rules or would exceed specified
    caps on maximum benefits or compensation that can be provided. 
    3. Golden Parachutes: Golden Parachutes are payments companies make in connection with a
    change in company’s ownership or control. This is used when there is a chance for the
    executive to flee because another company is stalking the firm with intentions to buy it.
    4. Golden handcuffs: A golden handcuff is a benefit, payment or incentive linked to the
    recipient staying for a specified period of time.
    Example of an Executive’s Compensation:

    Component Amount
    Basic Pay 1.5 million
    DA 0.75 million (50% of basic)
    Bonus 1 million (subjected to achieving goals)
    Short term Incentives 3.5 million
    Long term Incentives 14 million
    Medical Allowance 20 lakhs
    LTA 36000
    Special Allowance (deferred compensation) 0.82 million
    PF 0.18 million (12% of basic)
    Stock Plan 5 million (subjected to sales of the company)
    Pension plan 2 million
    Total 29 million

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