Executive Compensation

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EXECUTIVE COMPENSATION 1. HOW IS IT DETERMINED? Executive compensation generally consists of a mix of four components: - Annual Base Salary - Annual Incentive or bonus plans tied to short-term performance measures. - Long Term Incentives consisting in a mix of restricted stocks, stocks options and other long-term performance plans tied to shareholder return or financial performance. - Benefits plans. As a rule of thumb, the base salary constitutes 30% of total compensation, the annual incentive another 20%, the benefits about 10% and long-term incentives or the wealth creation portion of the compensation about 40%. Indeed, before the financial crisis, there was a lot of board attention to improving the relationship between pay and…show more content…
Executives can trade for entirely legitimate reasons, such as to raise money to meet a tax bill or simply to diversify. But of course they must avoid trading on nonpublic information, and that can lead to sticky situations, since executives do possess just such information much of the time. Regulatory efforts to find a way around this conundrum and allow executives to trade, a Wall Street Journal analysis suggests, are so flawed they have left a confusing landscape that can both raise suspicions about trades that are innocent, and provide cover for others that are less so. Trading by specific insiders, such as employees, is commonly permitted as long as it does not rely on material information not in the public domain. However most jurisdictions require such trading be reported so that these can be monitored. In the United States and several other jurisdictions, trading conducted by corporate officers, key employees, directors, or significant shareholders must be reported to the regulator or publicly disclosed, usually within a few business days of the trade. 5. SHOULD SHAREHOLDERS HAVE MORE SAY? Proposals that shareholders should have a greater direct say over managerial remuneration have been a by-product of the concerns expressed. debate on this point, however, has been largely speculative. In large listed companies, executive compensation will
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