This document discusses executive compensation, including its meaning, features, and common components. Executive compensation packages typically include a base salary, allowances, incentives, and perquisites. Companies determine compensation based on external competition, internal equity, and pay for performance. Packages may include salary, bonuses, equity compensation, and benefits like healthcare. Public sector executive pay is often lower than comparable private sector roles.

1. -- CChhaarraann KKaammaall SSiinngghh
MMBBAA((HHRR))

2. MEANING OF EXECUTIVE
COMPENSATION
• Executive compensation is how top executives of
business corporations are paid.
• The purpose of compensation of an executive is for an
individual who is in a management position at highest
levels.
• This category includes presidents, vice presidents,
managing directors and general managers.

3. FEATURES OF EXECUTIVE
COMPENSATION
• Managerial compensation cannot be compared to the
wage and salary schemes meant for in other employees
in organizations.
• Executives are denied the privilege of having unionized
strength.
• Secrecy is maintained in respect of executive
compensation.
• Executive pay is not supposed to be based individual
performance rather on organizational performance

4. MEANS OF COMPENSATION
• There are four basic tools executive compensation
packages in organization. These are:
• Base salary.
• Allowances.
• Incentives.
• Perquisites.

5. 5
COMPENSATION STRATEGY
• Corporate philosophy is the starting point
– Attract, motivate, retain top talent
• Salary (employment contracts)
• Bonus and incentives
• Golden parachutes
• SERPs
– Align interest of executive with shareholders
• Equity compensation
• Share ownership guidelines/requirements
– Align interest of executive with stakeholders
• New(er) concept
• Who are the stakeholders?

6. 6
COMPENSATION STRATEGY
• Pay determination
– External Competition
• Reference to pay for similar jobs at competing companies
• Benchmarking by consultants
– Internal Equity
• Comparison among similar jobs in the same company
• Internal pay relationships
– Pay for Performance
• Achievement of pre-established goals
• Corporate and/or individual
• Are guarantees consistent with this concept?

7. 7
COMPENSATION STRATEGY
• Pay delivery - form and proportions of pay over time
– Base pay or salary
– Variable pay (bonus or other cash incentive)
– Equity compensation (eg. stock options)
– Deferred compensation
– Supplemental retirement plans (SERPs)
– Severance (golden parachute/change in control payments)
– Perquisites

8. COMPENSABLE FACTORS
The US compensation institutes’ Phoenix plan uses the following
compensable factors:
1) Job related experience
2) Training time required
3) Frequency of review of work
4) Utilization of independent choice
5) Frequency of reference to guidelines
6) Frequency of work transferred through supervisor
7) Analytical complexity
8) Time spent in processing information
9) supervisors reporting to position level
10) Travel outside work location
11) Salary grade to which this position reports
12) Salary grade of positioning supervised
13) Management responsibility

9. COMPENSABLE FACTORS
The US compensation institutes’ Phoenix plan uses the following
compensable factors:
14) Revenue size
15) Asset size
16) Employment size
17) Budget size
18) Payroll size
19) Time spent in planning
20) Contact with suppliers / customers
21) Impact on departmental budget
22) Directing of others
23) Training of staff / physical stress experienced
24) Times spent working under deadlines
25) Time spent in hazardous conditions.

10. INDIAN PRACTICES
Executive compensation in India is built around
three important factors.
• Job complexity.
• Employers ability to pay.
• Executive human capital.

11. PRIVATE SECTOR vs. PUBLIC
SECTOR
• The salary of top executives of public sector are
miserable compared to private sector .
Examples:
• S B I of India chief is paid 10% of HDFC Bank
Managing Director.
• BHEL’S chief is getting about 10 to 12 lakhs per
annum as against ABB’s MD getting nearly 40 to
50 lakhs.

12. Compensation System
Components

13. EXECUTIVE COMPENSATION
GIVEN IN DIFFERENT COMPANIES
Base salary
Conveyance
Special allowances
Gratuity
HRA(House Rent Allowances)
Travelling allowances
Provident fund
Medical claim
Bank facility
Bonus
Providing cars
Stocks and share

14. EXECUTIVE COMPENSATION OF
ORACLE
SALARY INCLUDES
• Basic salary
• Conveyance
• Special allowances
• Gratuity
• Provident fund
• H R A( House Rent Allowances)
• Traveling Allowances
• Medical claim
• Bank facility

15. IBM EXECUTIVE COMPENSATION
PACKAGE
• Two main components of executive compensation
package
– Base salary and Cash Incentive/ Bonus
– Long-term Incentive Compensation

16. IBM EXECUTIVE COMPENSATION
PACKAGE

17. IBM EXECUTIVE COMPENSATION
PACKAGE
Also the perquisites like –
– Personal Financial Planning
– Personal Travel on company aircraft
– Personal Use of Company Autos
– Personal Security
– Annual Executive Physical
– Family Travel and Attendance at Company
– Related Functions
– Other Personal Expenses

18. • Executive Compensation at Disney:
– Base Salary
– Performance base annual bonus
• Net Income, ROE, ROA, EPS
• Stock or cash awards
– Stock options
• Initial employment, promotion, vested stock options.