myz-vgb.ru A Business Encyclopedia

Executive Compensation

Definition: The Executive Compensation 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 compensation 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.

The 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.

Leave a Reply

Your email address will not be published. Required fields are marked *

Shares

Related pages


what is demand pull and cost push inflationdefine stradleperfect competition in economics definitionmeaning of brain stormingaccounting rate of return definitionmotivational theories that impact buying behaviormeaning of penetration pricingwhat is an intraprenuerdemographic segmentation meaningdifferentiated oligopoly exampleshow to calculate net profit margin ratiodefine dasanidefine fixed asset turnovermnc definationwhat type of strategy would divestiture be classified aspolycentric orientation definitionlaissez faire coaching definitionwhat does ethnocentrism meanexample of expansionismduality linear programmingdelegating definitiondefinition of debenturestructual unemploymentwhat is the meaning of repo ratedry lease meaninglinear programming decision variablesleast preferred co worker scalealternatives to retrenchmentaccelerator principlean indifference curvelikert's leadership stylesconsumer buying process definitionloafing in tagalogjob rotation advantagesautocracy meansnational income at factor cost and market pricesituational contingency leadershipmeaning of buzz marketinghybrid financing definitionaccelerator economics definitiongreen shoe provisiondefine diguisevertical mergers definitionconglomerate diversification strategypublic provident fund withdrawalindifference curve exampledefine captivedifferent theories of dividend policyoperant condition definitionmarketing segmentation definitionretail jargonsfeatures of debentureswhat is single digit inflationclassical pavlovian conditioningpostal deposit schemessimultaneously means in hindirole of paralanguage in business communicationtaylor theory of scientific managementregiocentric companieswhat is chit fund businessdefine bureaucratic structurespeculative motive for holding moneybrand saliencydefine breakeven pointnominal group technique definitiondefinition of straddledescribe the four types of monopolieswhat is a monetaristmeaning of jitdescribe the difference between convenience sampling and quota samplingfree rein leadership advantages and disadvantagestypes of oligopoly market structureexpectancy theory of motivation examplesdefinition guerrillafeatures of perfect competition and monopolymultichannel conflictdefinition of coercive powerkinds of price elasticity of demandwhat is johari windowbases for segmenting business marketsopen market operations rbigolden parachute meaningdefine cost push inflation