We often get asked about what elements should be included in an Executive reward package. Not always because there are concerns about what is missing, sometimes it’s because it may be considered too much. In our experience Executive pay typically consists of several key elements, each designed to reward different aspects of an executive’s role and performance:

1.   Base Salary: This is the fixed annual salary paid to the executive. It is usually determined based on the individual’s role, experience, and market benchmarks (check these regularly to ensure that you are offering a competitive rate or you could have a major flight risk).

2.   Annual Bonuses: These are performance-based incentives awarded annually. They are often tied to short-term performance metrics such as revenue targets, profit margins, or other key performance indicators (KPIs). They may be part of a company-wide scheme or individually set.

3.   Long-Term Incentives (LTIPs): These incentives are designed to align the executive’s focus with the long-term success of the company. They usually take the form of stock options, or shares (or even faux shares). There are restrictions around how much the Exec will get (usually based on organisation goals), when they will get them and how they can be converted to cash. The aim, is of course to tie the individual to your company for the longer term. (The jury is out on how successful this is because for the right offer your Exec may abandon the long term view).

•  Stock Options: The right to purchase company stock at a predetermined price, usually lower than the market value. This component encourages your Executives to focus on increasing the company’s stock price.
• Performance Shares: These are shares awarded based on the achievement of specific long-term performance goals. They are often tied to metrics like total shareholder return or financial performance over several years.  (There are 100s of metrics to chose from so make sure you get the right ones for your organisation).

4.   Benefits: Executives typically receive a range of benefits, including health insurance, life insurance, pensions and retirement plans, and sometimes perks like company cars. We have noted a trend to include Execs in general benefits schemes (single status benefits) but there is still a general focus currently on “what do we need to offer to get the person in the door?”.

5.   Severance Packages (the so-called Golden Goodbye): These are payments and benefits provided to Execs upon termination of employment. They can include lump-sum payments, continuation of benefits, and stock option vesting. Watch out for this one though, no one wants to hit the press because an underperforming Exec has received a massive payout on termination.

By combining these components you can create a comprehensive compensation package that attracts, retains, and motivates your Execs while aligning their interests with the company’s long-term goals.



If there is a specific component of executive pay you’d like to explore further message me below.