Professional Documents
Culture Documents
Direct Financial
Compensation (Core
Compensation)
Grade 6
Grade 5
Grade 4
Grade 3 Band III
Grade 2
Band II
Grade 1
Band I
Low High
Job Worth
Copyright © 2016 Pearson Education, Ltd 9-45
LO 7
Two-Tiered Pay
Executive Compensation
Base salary
Bonuses and performance-based pay
Stock option plans
Perquisites (perks)
Severance packages
Base Salary
Factor in determining executive’s
standard of living
Salary provides basis for other forms of
compensation; may determine amount
of bonuses and certain benefits
U.S. tax law does not allow companies
to deduct more than $1 million of
executive’s salary
Copyright © 2016 Pearson Education, Ltd 9-53
LO 10
Bonuses and
Performance-Based Pay
Trend toward more performance-based
compensation packages for executives
Payment of bonuses reflects managerial
belief in their incentive value
Perquisites (Perks)
Special benefits provided by firm to
small group of key executives
Designed to give executives
something extra
Securities and Exchange
Commission lowered threshold for
disclosure of executive perks from
$50,000 to $10,000
Copyright © 2016 Pearson Education, Ltd 9-56
LO 10
Severance Packages
Say on Pay
Gives shareholders in all but smallest
companies an advisory vote on
executive pay
Some expect vote will cause greater
accountability on executive pay
Votes at least every 3 years