Executive Level RewardsCompensation Management

Prepared By

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Manu Melwin JoyAssistant Professor

Ilahia School of Management Studies

Kerala, India.Phone – 9744551114

Mail – manu_melwinjoy@yahoo.com

Executive Level Rewards• Executive compensation

or executive pay is composed of the financial compensation and other non-financial awards received by an executive from their firm for their service to the organization.

Executive Level Rewards• It is typically a mixture of

salary, bonuses, shares of or call options on the company stock, benefits, and perquisites, ideally configured to take into account government regulations, tax law, the desires of the organization and the executive, and rewards for performance

Executive Level Rewards• Executive Compensation

packages are designed by a company's Board of Directors, typically by the Compensation Committee consisting of independent directors, with the purpose of incentivizing the executive team, who have a significant impact on company strategy, decision-making, and value creation (Pay for Performance) as well as enhancing Executive Retention.

Executive Level Rewards• To help accomplish these goals,

Executive Compensation has four distinct characteristics:– Pay Package Design:

Executive pay arrangements typically consist of six distinct compensation components: salary, annual incentives, long-term incentives, benefits, perquisites and severance/change-in-control agreements.

Executive Level Rewards• To help accomplish these goals,

Executive Compensation has four distinct characteristics:

– Equity Compensation: The

majority of compensation of

most executive pay packages

comes in the form of

company stock.

Executive Level Rewards• To help accomplish these goals,

Executive Compensation has four distinct characteristics:– Performance-Contingent

Pay: Executive pay packages are designed so that the bulk of an executive's compensation is contingent on a company achieving pre-established criteria of specific financial results and/or strategic objectives.

Executive Level Rewards• To help accomplish these goals,

Executive Compensation has four distinct characteristics:– Vesting Schedules: Even

after financial or strategic criteria for an award is met, full ownership of the equity award are often conditioned on the executive's compliance with certain covenants.