An Executive compensation plan is designed to build incentive for executives to achieve company success. It is typically a composition of financial compensation and other non-financial award, which is heavily based on actual results of the company. Today, a better Executive Compensation solution calls for more than just increasing short-term incentives but focusing on long-term corporate performance and results.
What Can Lions Assurance Financial Do for You?
There are common ingredients for every comprehensive Executive Compensation recipe. However, your Executive Compensation recipe should be thoroughly reviewed and remade to better serve your unique situation within the current overall marketplace. Lions Financial can provide you a holistic solution and plan to create value for both CEO and Investors. We implement a four-step SIRE process to help our clients achieve business success:
- Survey: We will begin process with a questionnaire to have a general understanding of your business and identify the unique composition of CEO compensation and investor requirements. We clarify your business objectives and gain understanding of the unique current issues that need to be addressed.
- Insight: To have a deep insight of your specific business, we will incorporate industry research, determine product offerings available from many sources, create an assessment and evaluation about the structural plan options for Executive Compensation
- Recommendation: Then, we will come up with solutions for an executive compensation program that is tailored to your company and is in line with Board of Director requirements. As an independent firm we can present multiple providers to create a plan that helps create value and incentive for the CEO while accommodating investors.
- Execution: We will implement the strategy your company would like to execute on based on the options provided and budget available. We help achieve a better result with our professional experience, integration of technology, understanding of your industry, and staying attuned to the compliance and regulatory requirements.
Key Items to Know in Executive Compensation
Executive compensation is structured to create alignment of executive pay and shareholders’ benefit, and normally it is based on the performance of company. However, both publicly-owned and privately-held business may find their own problems with outdated executive compensation solutions.
- For Publicly-owned Corporations: Given prevailing tax structures and short-term earnings per share goals, executives in this type of corporations are incentivized to unproductively park much capital in cash reserves, primarily to dress up financial health statements for potential investors.
- For Privately-held Businesses: Applying typical public firm executive compensation approaches at privately-held firm exacerbates costly, long-lasting problems, which primarily caused by greater imbalance due to the lack of open-market.
It is important to better remake an Executive Compensation recipe to achieve a healthier balance between short- and long-term business goals. To make a reasonable solution, several items may be included in the design of executive compensation solution.
- Base salary
Executive compensation plan is similar to the pay package of typical salaried employee or manager, and it is normally stated as annual payroll. However, the rang of base salary is significantly different, concerning the company size, industry and the tenure of the executives.
- Performance based annual bonus
This component of compensation solution mainly focuses on short-term incentive. The executive can be awarded based on achievement of short-term goals or strategies of company.
- Performance based long term incentive
Long-term incentive is a system which tends to maximize the shareholders’ benefit and achieve the long-term strategy of company. This type of incentive can avoid executive only consider the short-term result that may diminish company value in the long run. It is usually provided in the form of stock-based compensation.
Except from the normal benefit paid vacation, insurance, severance pay, the executive benefit also includes some special plans. For example, nonqualified deferred compensation plans and Supplemental Employee Retirement Plans.
- Executive perquisites
Executive perquisites or “perks” are some extra benefit that the executives can enjoy. They are normally designed to identify the special value of the executive to the company.
- Contingent Payments
This component of compensation program provides executives payment for involuntary termination. In this way, the executive can be protected and help them make a reasonable decision to benefit the shareholders.
Some aspects should also be considered when design the unique compensation plan:
- Alignment of EBITDA attained and Performance Stock Appreciation Awards (PSARs)
- Unique Productivity Issue of business
- Unique Generational Cohort in the company
Contact Lions Assurance Financial to find a better strategy and holistic plan for your company. Lions Financial helps CEO’s, together with their Board of Directors, tax and legal advisors, to develop the optimal financial solutions for success. Contact us for in an initial consultation to determine how we can help your current business need.