8 Things You Should Know About Executive Compensation
- Companies are shifting towards long term, multi-year goals, and executive compensation is following suit, often setting compensation based upon long term success metrics.
- Executive Compensation is varied. It often consists ofa combination of salary, bonuses, equity, benefits, and other perks, and it typically based on company performance, length of employment, benchmark data, market practices, individual performance, and other factors.
- Phantom Stock and Stock Settled Appreciation Rights are compensation varieties thatallows companies to offer executives the benefits of stock without actually owning real stock. If the actual stock increases in value, then the phantom stock held by the employee also increases in value. Similarly, stock settled appreciation rights are where an executive receives a payment based on the amount the stock has increased.
- Dodd-Frank reform allows shareholders of a public corporation vote on executive compensation and recommend whether executives are receiving a fair amount of compensation. However, for the moment at least, this vote remains non-binding.
- Executives are covered by the same laws as normal employees. Just as employees must be paid all wages earned, that is no different for executives. This does not include minimum wage or overtime laws but does include executive compensation.
- It is always important to understand and often actually negotiate your package. Do this to ensure you get what you deserve, but you also might do this to demonstrate you’re the type of executive they’re looking for. Make concessions and design the package how you would like it to be, but also design your efforts to convey your work style.
- Know your value. Do some discovery work and try to find out what other executives at rival companies are worth. This will help you determine your value to your company.
- Consult an expert. We highly recommend talking to an attorney who has experience in executive advocacy. This will allow you to receive a fair and profitable package and avoid any messy situations that we see frequently, ranging from the taxation of equity to severance packages.
If you have any other questions surrounding executive compensation, check out our FAQs page or contact us today.