Module 4.2C: Special Compensation

Question 1

What is base pay?

Answer 1

Fixed amount of money paid to an employee in return for the work being performed

Question 2

What is an executive contract?

Answer 2

agreement between employee and employer prior to hire that includes duties and responsibilities of position, what power or authority employee has and what type of pay incentives they are eligible for (bonuses, performance-based increases, etc)

Question 3

What are clauses you might find in an executive contract?

Answer 3

1. Golden handshakes
2. Golden parachutes
3. Golden handcuffs
4. Golden life jackets
5. Clawbacks

Question 4

What are golden handshakes?

Answer 4

Severance agreements for when executives leave organization (voluntary or involuntarily)

Question 5

What are golden parachutes?

Answer 5

Provisions that minimize the chance that executives will lose their positions in a merger or acquisition

Question 6

What are golden handcuffs?

Answer 6

Provisions that make it hard for executives to leave without losing money

Question 7

What are golden life jackets?

Answer 7

Enticements to keep executives with reorganized company after a merger or acquisition

Question 8

What are clawbacks?

Answer 8

Protective provisions that let the organization take back bonuses or stock after executive misconduct or missteps

Question 9

Base pay for executives

Answer 9

Executives are usually FLSA exempt so they are not subject to minimum wage laws.

Question 10

Benefits for executives

Answer 10

Executives may receive the same benefits as other employees but at no cost (for example, no health insurance premiums) or they may get additional benefits not offered to others.

Question 11

Perks for executives

Answer 11

Organizations use perks to reward and offset the long hours and responsibilities executives have. Some examples include the following:

Time saving — a company driver or home communications network
Convenience — concierge services, housing, or use of a company jet
Work-life balance — club memberships or child care

Question 12

Equity compensation for executives

Answer 12

Stock holdings or ownership in the organization

Question 13

Bonuses for executives

Answer 13

Bonuses reward a specific behavior or met goal. An executive might receive a signing bonus, quarterly performance bonus, a payout after a number of years, etc.

Question 14

What is equity compensation?

Answer 14

Non cash pay that represents ownership in the firm (stock, performance shares)

ultimately ties the executive’s worth to meeting shareholders’ objectives and causing stock values to rise.

Question 15

What are stock options?

Answer 15

The right to buy a certain number of shares at a set price within a specific timeframe

Question 16

What are phantom stock?/

Answer 16

Promised future payout if the organization is sold, linked to company stock value or appreciation after date of award

Question 17

What are restricted stock?

Answer 17

Actual awarded shares restricted by vesting schedule, so they’re sellable only in the future when executive is fully vested

Question 18

What are performance shares?

Answer 18

Shares awarded for meeting specific organization goals or performance criteria

Question 19

SEC Rules for publicly traded companies in US

Answer 19

Publicly traded companies in the United States need to disclose executive compensation annually. HR should be sure the organization is compliant with Securities and Exchange Commission (SEC) rules, including providing proxy reports and the Summary Compensation Table.

Question 20

What is a balance sheet?

Answer 20

Provide additional benefits beyond the home country’s compensation and benefits to cover the expense of living abroad.

aims to give the employee the same standard of living when abroad as in the home country. Allowances might cover differences in housing and living costs, relocation expenses, children’s schooling, and travel home.

Question 21

What is Localization?

Answer 21

Use host country’s salary structure to set pay.

Countries might mandate a minimum wage and maximum weekly working hours and regulate base pay and benefits differently.

Question 22

What is split pay?

Answer 22

Pay expatriate partly in the host country’s currency and partly in the home currency.

narrows the difference between home and international currency rates and the host currency’s buying power.

Question 23

What are premiums?

Answer 23

Offer additional compensation or premiums for positions in challenging or less-desirable places.

Hardship: When living conditions in the host country are difficult.

Danger: When the risk of violence or disaster is high in either the place or the job.

Foreign service: When top talent needs additional incentive to apply.

Mobility: When employees need encouragement to take positions abroad.