The Evaluation Of Executive Compensation In Businesses -


The Evaluation Of Executive Compensation In Businesses

By Raymond Davis

Any non financial or financial awards or compensation that an executive in the firm can receive is called an executive pay. These are payments for the offered services to organizations. It includes the shares of stock, salary, perquisites, bonuses, and benefits. Based on some studies, the executive compensations should always be in alignment with the company social goals like public health goals. It is one part of corporate governance which is very important. Corporate governance is a process that will control and direct the corporation.

There are 6 tools of compensations namely the salary, short term incentives or bonuses, long term incentives, employee benefits, paid expenses or perquisites, and insurance. For corporations nowadays, the executive compensation Pacific Northwest like for the CEO and some of the top executives of a certain company are usually paid with the salary plus the bonuses. This is called as the total cash compensation. The short term incentives or bonuses often comes with a criteria depending on the executive role.

The executives may also be compensated with cash and shares of the company that are usually subject to restrictions of a long term incentive. But for it to be considered as a long term incentive, it must be after a period between 3 to 5 years. This is the time wherein the recipient will be transferring the shares and will realize the value. The vesting restriction may be based in the time or in its performance.

Vesting may occur in two different ways. One is cliff vesting and the other is graded vesting. The cliff vesting occurs in one date while the other occurs over a period of time. There are also other packages that includes executive compensation in Boise, ID. These are the retirement plans, interest free loans in house purchasing, private jet and limousine, and health insurances.

Evaluation of the executive compensation is one difficult task an individual may encounter. But luckily, there are already available tools in which they can use for faster and easier processing. The tools will be analyzing and comparing the filings automatically which will give better result to the meaning of raw details.

The comparison of performance and pay is another popular way of evaluating. But unfortunately, many executives are still being paid with bonuses and raises though their companies are faltering. So in this comparison of performance and pay, overpaying can be determined. And this is determined through the prices of stock. When the stock price will outpace change of pay, they were not being overpaid.

The second popular way of evaluating is the peer comparison. By this process, executives are compared to the industry peers. For market leaders, their CEO will be paid more slightly than their industries. Most of the executives should be paid on par with their peers.

There are already a lot laws that are passed that would help in satisfying the concerns of investor over the compensation. There are also laws that are more direct when it comes to the practices of companies. One example for this is the removal of tax shelter which helped avoid millions in their taxes.

So in conclusion, this is very important consideration for the investors when they make decisions. When an executive is improperly compensated, it may lead to cost money of shareholders. And also, it may decrease the profits and share price.

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