Executive Compensation Strategy

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Executive Compensation Strategy

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Executive compensation is a tricky business.  This action plan helps boards of directors create a comp plan that will attract and retain top performers and that is fair to the organization and the shareholders.   

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Executive compensation or executive pay is composed of the financial compensation and other non-financial awards received by an executive from their firm for their service to the organization. It is typically a mixture of salary, bonuses, shares of or call options on the company stockbenefits, and perquisites, ideally configured to take into account government regulations, tax law, the desires of the organization and the executive, and rewards for performance.

The three decades starting with the 1980s, saw a dramatic rise in executive pay relative to that of an average worker's wage in the United States and to a lesser extent in a number of other countries. Observers differ as to whether this rise is a natural and beneficial result of competition for scarce business talent that can add greatly to stockholder value in large companies, or a socially harmful phenomenon brought about by social and political changes that have given executives greater control over their own pay. Recent studies have indicated that executive compensation should be better aligned with social goals  (e.g. public health goals). Executive pay is an important part of corporate governance, and is often determined by a company's board of directors.