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Executive Compensation

Executive Compensation

Posted by Kathy Harrington-Sullivan | Nov 24, 2016 | 0 Comments

In most occupations, it's a fairly simple matter for job applicants to negotiate the salary they want. Typically, there is a reasonable salary range for a given position, and the negotiation takes place within that predetermined range. In some cases, the exact salary is calculated in advance and listed in the job posting, so there may be no room to haggle. The process is substantially different for so-called “C-level” executives, i.e., CEOs, COOs, CFOs, and similar titles found at the top echelons of an organization.

At the executive level, the process of bringing aboard talent involves a variety of considerations. Executives tend to look for more than just a large salary. Some of their goals may be intangible: they may be seeking opportunity for self-actualization or a personal benchmark. Aside from that, executives generally want compensation outlined in measurable black-and-white terms in an employment contract.

Executive compensation is multifaceted – there are often perks, benefits, and options, each of which must be negotiated separately. In publicly traded companies, SEC rules require that the details of executive compensation packages be made freely available to investors. In any event, companies must be able to offer competitive executive compensation packages to attract the right leaders.

Below are some common features of executive compensation packages:

Salary – How much money will the executive receive over the course of the year? This is the most obvious element of executive compensation, but it is only one part of a much bigger picture.

Stock options – This grants the executive the right to buy and sell company stock. The executive is allowed to purchase stock at a certain strike price within a specific span of time. Traditionally, stock options are considered to encourage optimal performance among executives because their goals become congruent with the goals of the shareholders. In some cases, executives will accept a substantially lower salary in exchange for generous stock options.

Retirement compensation – What will the executive receive after they leave the company? Packages often include cash as well as stock options. Retirement compensation is often misunderstood in the general public because of its association with “golden parachute” plans that have historically rewarded some disastrous job performances with huge payouts, but these are the exceptions rather than the rules.

Many commentators believe that retirement packages can discourage corporate takeover attempts by increasing the expenses involved in taking such an action. Others insist that this adequate retirement compensation is necessary to attract truly first-rate executive talent.

Deferred compensation – As the name indicates, this is compensation that will be paid out at a future date.

Flexible scheduling – How many hours will the executive spend in the office? Will they be allowed to perform certain duties at home, via telecommute? How much vacation time will be allotted to them? A flexible schedule is attractive to many busy executivess who have family duties and other obligations to manage.

Other perks – These can include just about anything—gym memberships, private jets, car rental service, life insurance, and much more.

Because of the highly customized nature of executive compensation—no two cases are exactly alike—as well as the complexity of negotiations involved, it's best to have an experienced attorney in your corner as you work out an agreement. Contact the legal professionals at Barrett & Farahany, LLP—we have more than 15 years of experience in the Atlanta, GA area and can help you negotiate an executive compensation plan that is the most optimal fit for your needs.

About the Author

Kathy Harrington-Sullivan

Kathy Harrington Sullivan is a Partner at Barrett & Farahany and manages the firm's case evaluation team. Because knowledge truly is power, Kathy and the Atlanta employment attorneys on her team regularly consult with and empower potentia...

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