Module 4.2C: Special Compensation Flashcards
What is base pay?
Fixed amount of money paid to an employee in return for the work being performed
What is an executive contract?
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)
What are clauses you might find in an executive contract?
- Golden handshakes
- Golden parachutes
- Golden handcuffs
- Golden life jackets
- Clawbacks
What are golden handshakes?
Severance agreements for when executives leave organization (voluntary or involuntarily)
What are golden parachutes?
Provisions that minimize the chance that executives will lose their positions in a merger or acquisition
What are golden handcuffs?
Provisions that make it hard for executives to leave without losing money
What are golden life jackets?
Enticements to keep executives with reorganized company after a merger or acquisition
What are clawbacks?
Protective provisions that let the organization take back bonuses or stock after executive misconduct or missteps
Base pay for executives
Executives are usually FLSA exempt so they are not subject to minimum wage laws.
Benefits for executives
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.
Perks for executives
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
Equity compensation for executives
Stock holdings or ownership in the organization
Bonuses for executives
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.
What is equity compensation?
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.
What are stock options?
The right to buy a certain number of shares at a set price within a specific timeframe
What are phantom stock?/
Promised future payout if the organization is sold, linked to company stock value or appreciation after date of award
What are restricted stock?
Actual awarded shares restricted by vesting schedule, so they’re sellable only in the future when executive is fully vested
What are performance shares?
Shares awarded for meeting specific organization goals or performance criteria
SEC Rules for publicly traded companies in US
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.
What is a balance sheet?
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.
What is Localization?
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.
What is split pay?
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.
What are premiums?
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.
