Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Courses
  • Tutoring
  • Home
  • Law, Transactions, & Risk Management
  • HR, Employment, Labor, & Discrimination

Executive Compensation - Explained

What is Executive Compensation?

Written by Jason Gordon

Updated at April 16th, 2022

Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Marketing, Advertising, Sales & PR
    Principles of Marketing Sales Advertising Public Relations SEO, Social Media, Direct Marketing
  • Accounting, Taxation, and Reporting
    Managerial & Financial Accounting & Reporting Business Taxation
  • Professionalism & Career Development
  • Law, Transactions, & Risk Management
    Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
  • Business Management & Operations
    Operations, Project, & Supply Chain Management Strategy, Entrepreneurship, & Innovation Business Ethics & Social Responsibility Global Business, International Law & Relations Business Communications & Negotiation Management, Leadership, & Organizational Behavior
  • Economics, Finance, & Analytics
    Economic Analysis & Monetary Policy Research, Quantitative Analysis, & Decision Science Investments, Trading, and Financial Markets Banking, Lending, and Credit Industry Business Finance, Personal Finance, and Valuation Principles
  • Courses
+ More

Table of Contents

What is Executive Compensation?Types of Executive CompensationAcademic Research on Executive Compensation

What is Executive Compensation?

Executive compensation is the incentive offered to executives to attract and retain them and to encourage them to work in the best interest of shareholders. Executive compensation may be offered in cash on non-cash forms. It is often reported that executives who are not offered any from of executive compensation are more likely to underperform, to quit the company, and to not perform in the best interest of shareholders to achieve corporate objectives.

Back To: MANAGEMENT

Types of Executive Compensation

Executive compensation has many types:

  • Cash compensation- The company may offer monetary rewards to its executive employees to keep them motivate and committed to the company goals. Cash compensation generally comes in the form of salaries and performance bonuses.
  • Option grants- A company may also compensate its executive members by offering non-cash incentives, such as the employee stock option. A stock option is the right to buy a specific number of shares of stock at at specific price (the strike price) for a given time period. The executive will exercise the stock option if the stock prices goes up. This will result in gains, as the company will pay them the difference between the strike price and market value of share. This method of compensation is more tax-friendly to the executive than cash compensation.
  • Long-term incentive plans (LTIPs)- An LTIP is an incentive reward system that is offered to improve employee performance in long term. Generally, employees are required to meet some conditions to show they maximize shareholders value with their performance. This could be a cash or stock award based upon achieving performance milestones or improving upon existing metrics.
  • Retirement packages- A company may offer retirement benefits to executive employees to motivate them and keep them committed to corporate goals. The executives may pensions, deferred compensation, health benefits, earn-outs, and other perks upon retirement. Executive Perks- Executive may enjoy many privileges given to them by the company. Executive perks may include a company car, accommodations, private planes, travel compensation, dining reimbursements, and many more.


executive compensation

Was this article helpful?

Yes
No

Related Articles

  • Exempt and NonExempt Employees (FLSA) - Explained
  • Work Opportunity Tax Credit - Explained
  • Non-Discrimination Rule - Explained
  • Consolidated Omnibus Budget Reconciliation Act (COBRA) - Explained



©2011-2023. The Business Professor, LLC.
  • Privacy

  • Questions

Definition by Author

0
0
Expand