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PREPARED BY: RAVI KANT
Components of executive compensation.. Nature of executive compensation.. Trends in compensation? Ranking of different companies.. Conflicts«. Reason for high executive compensation..
Supervisor Work rs or r tiv E loyees .Board of Directors Managing Director General Manager Executive Committee Departmental Managers Deputy Mangers Assistant Managers Foreman.
Relevance of Topic Executive compensation has been a hot HR topic because of: High visibility Frequently perceived unfairness Importance .
FEATURES OF EXECUTIVE COMPENSATION Executive compensation cannot be compared with wage. It is based on competence. . Executive pay is based on corporate performance rather than individual.loyality. Executive remuneration may be subject to statutory ceilings. nonsubstitutability. Executives are denied of having the unions.
Nature of Executive Compensation Can either be a motivational tool encouraging executives to pursue strategic decisions that are in the best interest of shareholders or it can be designed to reinforce the wrong strategic choices .
Stockholder want higher return & government wants compliance with laws. Ambiguity between organizational goals and ethical standards...Conflicts faced. Difficult to design corporate strategies. Special group Supervisors Top management Board of directors Professional employees issue Caught between upper management and employees. .
The Role of Risk in the Executive Compensation Contract Employment risk .the possibility that the executive will be terminated either due to unsatisfactory performance or due to change in control Compensation risk .the potential unpredictability in the executive·s future pay represented mainly by the proportion of stock options in the total pay package .
The Role of Risk in the Executive Compensation Contract Continued Business risk .the uncertainty surrounding the firm·s competitive environment .
Recent Trends .
Reason for high executive compensation Social compensation Economic approach Self motivation Government regulations .
Insurance policies. ESOPs.insuance policies for employees.allowing family members to accompany employees on official visits. Cash component. Advances and incentives.Ranking of different companies RANK 1 COMPANY INFOSYS PERCIEVED ADVANTAGES ESOPS. 2 TATA GROUP 3 WIPRO 4 5 6 HSBC CITIBANK ICICI . Incentives and opportunities to graduate to a higher package.leave facilities and opportunities to graduate on a higher package.leave facilities.accident insurance.loan facilities and advances.inexpensive food.food coupans.ESOPs.opportunities to graduate to a higher package.
Retail vp earned Rs 50.v.01 crore.D Shibhulal earned Rs 1. Chairman Narayana Murti earned Rs 0.Infosys-an example During fy06 Infosys ceo earned Rs 0.p earned Rs 49 lakh.41 crore. Customer delivery head earned Rs 60 lakh.7 lakh. . Infosys group lead S.42 crore. S.
Perquisites . Supplementary benefits. Long -term incentives and bonuses.Components of executive compensation Base salary Short-term incentives or bonuses.
.Short-term incentives Annual incentive plan an average percent of 57 percent salary for high level executives and 20 to 25 percent for low level executives.
They are a form of profit sharing.Long-term incentives Stock option An option is not a bonus. . The returns are subject to market risk.
Easy to operate for small companies .. Money is used as a motivator. Cash bonus Different from profit sharing.«contd.
.Supplementary Benefits Deferred Compensation It is deferred to future date. Depends upon future tax rates and inflation. Future date is when tax rates are slightly reduced.
t.personal & legal counselling.c .resort.Executive Perquisites Internal perks:luxury office.expenses for vacation e.air travel and incidental expenses.c External perks:Payment of hotel.special parking e.an executive dining room.t. Personal perks:low cost loans.
.a security to the executives if they lose their job.Additional benefits Severance benefit :A special perk available to some executives. Retention benefit:Retaining those ceos emotionally who are attaining higher results.
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