The Executives pay refers to the financial payment and other non-monetary rewards given to the top executives in exchange for their services to the organization.
In other words, the executive pay is the remuneration
package given to the higher management of the firm for their work on the behalf
of the organization. The kind of employees that are entitled to the executive
compensation are corporate presidents, vice-presidents, chief executive
officers, chief financial officers and other senior executives.
Often the key elements in the executive pay are:
- Base Salary
- Executive Bonuses
- Long-term incentives, such as stock options
- Retirement packages
- Deferred compensation
- Executive perks
- Other benefits and perquisites.
Following
are the main objectives of executive compensation policy:
The manager should be incentivized so that they adopt those
strategies, investments, and actions that result in the increase in the
shareholder value. Thus, an executive aligns his interest with the interest of
the shareholder.
The remuneration package should be designed such a way that
it motivates the executives to work harder, take risks and take unpleasant
decisions such as termination or retrenchment, aimed at increasing the
shareholder’s wealth.
The executive compensation is often designed with the intent
to retain the executives during the bad times caused due to the adverse market
and industry factors.
The cost of the executive pay must be limited to the extent
where the shareholder’s wealth does not get affected and, in fact, maximizes.
Generally, the executive compensation packages are designed
by the board of directors, particularly the compensation committee, which is
comprised of the independent directors. The purpose for which the committee is
created is to pay incentives to the executive team who play a significant role
in decision making and is responsible for the corporate strategy and the
overall value creation of the company.
Other Objectives
- Attract, retain and motivate qualified executive officers
- Hold executive officers accountable for performance
- Align executive officers’ interests with those of stockholders
No comments:
Post a Comment