There is a huge disparity between the year-on-year increase in a top executive’s salary vs the median salaries of that company’s employees. But that’s not what we are here to discuss today. We know the exorbitant amount the top executives earn, today we will have a look at what top executives’ salaries includes.
1. Base Salary
Just like all of us, higher executives’ remuneration also includes base salary. It’s the salary paid to an employee before any additions or reductions to the overall compensation.
2. Variable Pay or Performance-linked incentives
At the leadership level, the variable pay is high and depends on the performance of the executive. The growth and overall performance of a company determine how well an executive has performed. Performance-linked incentives form a big part of a CEO’s remuneration.
The meaning of perquisites is a bit different for executives as compared to regular employees. An executive’s perquisites may include the usage of aircraft, automative-related perks, professional services, etc.
4. Long-term Incentives
Long-term incentives are a type of variable compensation that is earned in the present but the payment of which is deferred over time. This is often in the form of stock options but can be in cash too.
5. Retiral/Post Employment Benefits
Provident Fund, Superannuation, etc are deemed as retirement or post-employment benefits. These are the benefits provided by an organization that becomes due at the time of retirement.
There are different types of bonuses that an executive receives and the type of bonus determines when it is paid out. Different bonuses an executive can receive include but are not limited to signing bonuses, annual bonuses, retention bonuses, etc.
7. Stock Options
ESOPs or Employee Stock Options are a type of equity compensation granted by companies to their employees and executives. Most top executives have stock options as a part of their compensation.
As mentioned, the performance of the company is highly dependent on the performance of its CEO or top executives. Hence, an executive’s remuneration sometimes also includes a commission on the profits of the company.