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An executive compensation plan, also known as executive pay, is the combination of salary, benefits and bonuses offered to executives or other top management positions at a company in return for their work.
Executive compensation is a very important issue for investors to consider when making decisions. An improperly compensated executive can cost shareholders money and can produce an executive who lacks the incentive to increase profits and boost the share price.
On average, CEOs receive about 50% of their base pay in the form of bonuses.
On average, CEOs receive about 50% of their base pay in the form of bonuses.
A typical executive compensation package consists of five components: base pay; health and retirement benefits; fringe benefits; short-term incentives; and long-term incentives.
A typical executive compensation package consists of five components: base pay; health and retirement benefits; fringe benefits; short-term incentives; and long-term incentives.
For each executive, total compensation is calculated as the sum of base salary, discretionary and performance-based cash bonuses, the grant-date value of stock and option awards, as well as other compensation, which typically includes benefits and perquisites.
Long-Term Incentives (LTIs) are a form of variable compensation that is earned in the present but whose payment is deferred and spread over time. This can be cash compensation but often is in the form of stock or stock options.
Compensation may also be used as a reward for exceptional job performance. Examples of such plans include: bonuses, commissions, stock, profit sharing, gain sharing.