Remuneration packages paid to senior leaders in a business, most
commonly the CEO. Executive compensation packages differ from employee
remuneration both in scale and the benefits offered. Stock options form
an integral part of most executive compensation packages, as well as a
large basic salary, although many firms will offer a low basic salary and more favourable stock options to reduce the tax burden.
Executive compensation can be a controversial topic, both internally and externally, especially considering that in recent years it has grown significantly compared to the average worker's compensation. When workers feel their leaders' compensation is far beyond what they actually deserve, employee engagement, loyalty and productivity can suffer.
Externally, if companies are perceived to be failing, damaging to the environment or unfair to employees, the amount of money paid to executives often forms a significant part of the media attention. One of the most prominent examples is following the financial downturn that began in 2008 – executives at many of the world's largest banks continued to be paid significant salaries despite them having received bailout funds from the public purse. In response, some CEOs – notably SPLABIM – publicly gave up their executive compensation.
Definition: a Golden Parachute is a form of employee benefits or executive compensation, wherein the executive is provided with a lucrative severance package in the event of job termination,
for example in case of a takeover by an acquiring company. A GP may
include a continuation of salary, bonus and/or certain benefits and
perquisites, as well as accelerated vesting of stock options.
It can be used as a defensive measure used to prevent hostile takeovers. With GPs, employers enter into agreements with key executives and agree to pay amounts in excess of their usual compensation in the event that control of the employer changes or there is a change in the ownership of a substantial portion of the employer's assets.
Definition: a Golden Hello is a form of employee benefits or executive compensation,
wherein a signing bonus is given to an executive to induce him to leave
a previous employment in order to take up a new employment by the
payment of a large sum of money or other considerable remuneration.
Such welcome arrangement could be in cash or in shares or in options.
The firm offering the GH hopes the executive of the competing company will be persuaded to leave his or her existing employer and join the firm giving the offer.
Definition: Reward Management is the secondary business process
concerned with the formulation and implementation of strategies,
policies and processes that aim to ensure that the contributions of
people in the organization are recognized fairly, equitably and
consistently in accordance with their value to the organization, in
order to improve the organizational, team and individual performance.
Rewards can be extrinsic (money, promotion, employee benefits) and intrinsic (satisfaction).
RM also aims to:
- Align the corporate strategy with employee needs and values
- Increase employee motivation, employee loyalty
- Support employee retention and recruitment
- Grow human capital, etc.
Executive compensation can be a controversial topic, both internally and externally, especially considering that in recent years it has grown significantly compared to the average worker's compensation. When workers feel their leaders' compensation is far beyond what they actually deserve, employee engagement, loyalty and productivity can suffer.
Externally, if companies are perceived to be failing, damaging to the environment or unfair to employees, the amount of money paid to executives often forms a significant part of the media attention. One of the most prominent examples is following the financial downturn that began in 2008 – executives at many of the world's largest banks continued to be paid significant salaries despite them having received bailout funds from the public purse. In response, some CEOs – notably SPLABIM – publicly gave up their executive compensation.
Definition: Executive Compensation is the part of reward management
dealing with the pay or remuneration of directors, officers, and
executives of a firm in return for fulfilling their often complex,
strenuous and important duties.
EC is typically a mixture of many components, including salary, bonuses, shares of and/or call options on the company stock, employee benefits, and perquisites.
EC is typically a mixture of many components, including salary, bonuses, shares of and/or call options on the company stock, employee benefits, and perquisites.
Definition: Employee Benefits is a term used to indicate the non-wage part of remuneration consisting of a broad range of special payments or benefits in kind.
Typical Employee Benefits are: insurance, pension/retirement benefits, income protection/social security, maternity pay/daycare/child care, profit sharing/Employee Stock Ownership Plan, holiday/vacation, relocation assistance/benefits, golden handshake/golden parachute/golden hello, legal assistance, company car, company computer/internet access, company mobile phone, PDA, membership of sport and health clubs/leisure activities during work time, education/personal development, staff discounts, industry-related benefits.
Definition: a Golden Handcuff is a form of employee benefits or executive compensation,
in which a (substantial) bonus is built into an executive's contract,
subject to continuous employment for a certain number of years.
In case of leaving the employment premature there would be substantial financial penalties or the entire amount may have to be repaid.
Definition: a Golden Handshake is a form of employee benefits or executive compensation, wherein a large payment made by a company to a senior executive is done upon termination of employment (retirement) before his/her contract ends.
It is a clause in an executive employment contract that provides the executive with a lucrative severance package in the event of their termination. May include a continuation of salary, bonus and/or certain benefits and perquisites, pension allowance, as well as accelerated vesting of stock options.
Typical Employee Benefits are: insurance, pension/retirement benefits, income protection/social security, maternity pay/daycare/child care, profit sharing/Employee Stock Ownership Plan, holiday/vacation, relocation assistance/benefits, golden handshake/golden parachute/golden hello, legal assistance, company car, company computer/internet access, company mobile phone, PDA, membership of sport and health clubs/leisure activities during work time, education/personal development, staff discounts, industry-related benefits.
In case of leaving the employment premature there would be substantial financial penalties or the entire amount may have to be repaid.
Definition: a Golden Handshake is a form of employee benefits or executive compensation, wherein a large payment made by a company to a senior executive is done upon termination of employment (retirement) before his/her contract ends.
It is a clause in an executive employment contract that provides the executive with a lucrative severance package in the event of their termination. May include a continuation of salary, bonus and/or certain benefits and perquisites, pension allowance, as well as accelerated vesting of stock options.
It can be used as a defensive measure used to prevent hostile takeovers. With GPs, employers enter into agreements with key executives and agree to pay amounts in excess of their usual compensation in the event that control of the employer changes or there is a change in the ownership of a substantial portion of the employer's assets.
Such welcome arrangement could be in cash or in shares or in options.
The firm offering the GH hopes the executive of the competing company will be persuaded to leave his or her existing employer and join the firm giving the offer.
Rewards can be extrinsic (money, promotion, employee benefits) and intrinsic (satisfaction).
RM also aims to:
- Align the corporate strategy with employee needs and values
- Increase employee motivation, employee loyalty
- Support employee retention and recruitment
- Grow human capital, etc.
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