Description of each element:Salary
is the first component of executive remuneration.Salary is supposed to be determined through evaluation andserves as the basis for other types of benefits.
plays an important role in today's competitiveexecutive payment programmes.There are almost asmany
systems as there are companies using thisform of executive remuneration. If bonus constitutesshort-term benefit, stock options are long-term benefitsoffered to executives. Stock options are attractive toshareholders too.
contribute a major source of income forexecutives.Bonuses related to performance are also aid to executives ata certain percentage of the profits. The bonuses mayaverage from 30 per cent- to 50 per cent of the basic salary.
These bonuses operate most effectively in increasingmotivation when the following conditions exist:
The amount paid is closely related to the level of individual performance;
The amount paid after taxes represent a clearlynoticeable rise above the base salary level.
The amount paid is closely related to the level of company performance;
The amount paid is tied into the base salary in such away that the combined earnings are equitable both inrelation to internal and external standards;
The amount paid is reduced drastically whenever anindividual experiences a real and continuing decreasein performance effectiveness;
The amount paid is based on an easily understandablesystem of allocation, and the individual is provided withcomplete information on the relationship betweenbonus and performance.