By, Sheshasri. Roll No:005. RBS.: Executive Compensation

EXECUTIVE COMPENSATION
By ,
Sheshasri.
Roll no:005.
Rbs.
Executive Compensation or managerial
remuneration is how top executives of
business corporations are paid.
Managers are very short in supply ,

therefore, organizations are competing with
each other to attract , retain and motivate
Managerial compensation is done based on
four elements. They are:
Salary
Job evaluation.
Job size & Region of Organization
Bonus/Profit Sharing
Based on performance
Return on Investments
More Stake
Perquisites
Health Club Membership
Discounted company products.
First class Air Fare
BENEFITS FOR EXECUTIVES
• Traditional retirement , health insurance vacations and others .

• Executive compensation may include other benefits which
other employee do not receive
• Executive health plans with no co-payments and with no
limitations on deductible or physical choice are popular among
small and middle sized business
• Trust of various kinds may be designed by the help the
executive’s to deal with estate issues
• Differed compensation offers another possible means of
helping executives with tax liabilities caused by incentives
compensation plans
Unique feature of managerial remuneration
• Managerial remuneration cannot be compared to wage and salary schemes meant for non-
managerial employees in organization . Factors and variable are more numerous in managerial
jobs and simple comparisons and ratings are not possible .
• Managerial are denied the privilege of having unions and collective bargaining . Their
competence and contribution are the strengths for determining their pay package .
• Secrecy is maintained in respect of managerial remuneration . This is done because no two
managers in the private sectors, in the same grade receive the same pay. Compensation and
reward depends upon such factors as competence , length of service , contributions, and loyalty
to the company .
• Managerial pay is not supposed to be individual performance measure but rather on the unit of
organization performance . This is because a managers own performance is assumed to be
directly reflected in measure of units of corporate performance
• Managers compensation is subjected to statutory sealing. As per the latest guidelines , monthly
salary varies from Rs 40,000 to 87,500 subject to an overall limit fixed per annum including
perquisites .
• Finally theoretically, remuneration of managerial personnel is supposed to be guided by job
description , job evaluation, salary grades with ranges of pay in each grade and salary surveys
.But in practice norms seem to have thrown to winds and exorbitant amounts are paid to
decision makers in organizations. The annual salary of Ceo's range from Rs 50 lakhs to few crore
Mythologies-cum Strategies for managerial
compensation
• Salary/basic salary/consolidated salary continues to remain a major
component , though salary scales are often discarded these days or used
only as guides. It is the performance contribution that determines the pay
and future revisions, which vary widely from individual managers .
• Grade wise flats allowances are being consolidated , except where tax
exemption benefits are available . Allowances may be linked to the salary
as a percentage or by slabs , but preferences is for flats amounts , which
do not increase automatically and increase at the discretion and therefore
controllable
• Reimbursement of expenses incurred on company's work has been limited
, and that in line to conform to the tax laws . Being actual in most cases ,
they are not considered as part of compensation , unless it is provided
towards personal benefits .
• Annual –payments –bonus or commission and leave travel are common
features. Some tax relief applied for the latter
• Benefits generally comprises of furnished or unfurnished company owned or
leased accommodation , use of company owned or leased vehicle , medical
coverage ,, covering provident fund, pension, or superannuation and gratuity , post
retiral medical assistance , easy loan scheme or utility items or vehicle , furniture
or utility items , etc, renting employees owned housing , club entrance fee
reimbursement , etc . Minor benefits could be provision of security , drivers ,
gardening, assistant, sales of products or assets at the concessional rate , the
relocation and transfer expenses , including admission etc, fees for children , credit
card fees, phones etc.
• Most of the companies are now moving away from traditional compensation
package (basics, DA,HRA etc) to cost of company basis. Companies are talking in
terms of gross salary and asking managers to do their own tax planning
• Some of the companies give their managers freedom to design package keeping in
view of total cost . It means giving managers the flexibility to choose lifestyles of
their own living within the certain parameters .
• Performance linked payments+Bonus+generous increments +merit awards are
increasing . The trend is to move away from seniority and hierarchy system and
attach value to performers. The concept of star performers are giving ground.
• Lifestyles perks( good accommodation, club membership , liberal furnishing ,
holiday abroad with family ) continues to be the practice even if these are taxed.
New way of pay
• Against changing patterns , organization are increasingly linking their variable pay
plans to individuals , teams and organizational performance. the extent of linkage
and the nature ( short/long term) varies for different levels within the
organization . Some of the variable pay plans ( VPPs) that organizations have
successfully implemented include individual/team performance based gain profit
sharing , productivity based business individual /team performance , based gained
profit sharing , productivity based business incentives , stock options , and
ownership and other customized schemes .
• While long term incentive plan is a good mechanism to link organizational
objectives to individual rewards . The feedback is that 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
• Increasingly , companies are experimenting with the “cost to company
"concept , with focus on higher rich compensation structure. New and
emerging sectors like retail , telecom, aviation and IT/ITES which have the
advantage of no legacy issues and also have younger employee population
. Tend to adopt simplified structures at the outset
• Another concept gaining popularity due to changing tax environment is
the flexible salary structures where the employee has the freedom to
choose from the defined menu of items of pay and optimize his/her own
tax planning . This works in a win-win manner and has increasingly gained
acceptance as it provides flexibility to the employee and tax compliance to
the organization
ANY QUIRIES
?
Thank you

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EXECUTIVE COMPENSATION

Managers are very short in supply ,

• Traditional retirement , health insurance vacations and others .

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