Discuss the five basic elements of executive compensation packages.
What will be an ideal response?
There are five basic elements of most executive compensation packages:
(1) Base salary: Being competitive is a very important factor in the determination of executive base pay. Although formalized job evaluation still plays an occasional role in determining executive base pay, other sources are much more important. Particularly important is the opinion of a compensation committee of the company's board of directors.
(2) Bonuses: Annual bonuses play a major role in executive compensation and are primarily designed to motivate better performance. Today, bonuses are given to 90 percent of executives. The types of organizations relying almost exclusively on base salary for total direct compensation typically have one or more of the following characteristics: (a) tight control of stock ownership, (b) not-for-profit institutions, or (c) firms operating in regulated industries.
(3) Long term incentives: By far the most common long-term incentive remains the executive stock option.
(4) Employee benefits: Because many benefits are tied to income level, executives typically receive higher benefits than most other exempt employees. Beyond the typical benefits, however, many executives also receive additional life insurance, exclusions from deductibles for health care costs, and supplementary pension income exceeding the maximum limits permissible under legal guidelines for registered (eligible for tax deductions) pension plans.
(5) Perquisites: Perquisites, or "perks," are designed to satisfy several types of executive needs. One type of perk could be classified as internal, providing a little something extra while the executive is inside the company: luxury offices, executive dining rooms, special parking. A second category also is designed to be company-related, but for business conducted externally: company-paid membership in clubs/associations, payment of hotel, resort, airplane, and auto expenses. The final category of perquisites, called personal perks, includes such things as low-cost loans, personal and legal counselling, free home repairs and improvements, personal use of company property, and expenses for vacation homes.
You might also like to view...
Patty buys a Persian rug from James, a plumber, in an online auction. James called Patty on Wednesday to inform her that she submitted the winning bid and that she could pick it up anytime or he would ship the rug to her on Friday. On Thursday, the rug was destroyed in a garage fire at James' house. Which of the following statements is true in this case?
A. Patty bears the loss as James was only providing a service. B. James bears the loss as he has tendered delivery of goods. C. Patty bears the loss as James is not a merchant. D. James bears the loss as he has not delivered the goods.
Which of the following statements regarding postretirement benefits other than pensions is true?
A) A liability for postretirement benefits other than pensions is not required to be reported on the balance sheet. B) The interest component of the net postretirement benefit expense is based on the accumulated postretirement benefit obligation (APBO). C) The interest component of the net postretirement benefit expense is based on the expected postretirement benefit obligation (EPBO). D) An intangible asset for other postemployment benefits (OPEB) is required to be reported on a company's balance sheet.
If an analyst expects a firm to generate net income each period exactly equal to required earnings, then the value of the firm will be equal to the ______________________________ of common shareholders' equity
Fill in the blank(s) with correct word
Which of the following is the best example of a financial performance measure for a hotel's balanced scorecard?
a. Number of frequent-customer points awarded. b. Time taken to register a guest. c. Number of employee suggestions. d. Revenue per available room.