Sunday, October 2, 2016

Executive Compensation For The Investment Evaluation

By Raymond Davis


Any non financial or financial awards or compensation that an executive in the firm can receive is called an executive pay. These are payments for the offered services to organizations. It includes the shares of stock, salary, perquisites, bonuses, and benefits. Based on some studies, the executive compensations should always be in alignment with the company social goals like public health goals. It is one part of corporate governance which is very important. Corporate governance is a process that will control and direct the corporation.

Six tools of compensation are being used and these are the perquisites or paid expenses, insurance, long term incentives, employee benefits, salary, and bonuses or short term incentives. In most corporations nowadays, executive compensation Pacific Northwest in certain companies such as the CEO or other top executives are often paid with salaries plus bonuses. It is called total cash compensation. Short term incentives or the bonuses usually are based in a criteria, in which is dependent to the executives role.

Executive can be compensated with the shares of the company and with cash which are often subjected to restrictions of long term incentives. But to make it considered as long term incentive, it should be after the period of three to five years. This is usually the time that the recipient is allowed to transfer the shares and realize the value. Vesting restrictions are based on time and performance.

Vesting may probably occur in different ways. First is by cliff vesting and the second one is by graded vesting. For cliff vesting, it will only occur in one date. For graded vesting, it will occur every time. In Boise, ID, other executive compensation packages are being offered. These is composed of private jet or limousine, health insurances, retirement plans, and an interest free loans when purchasing a house.

One difficult task for an individual is to evaluate the executives compensation. But fortunately, many tools are already available that can be used for making the processing much more easier. These tools can automatically analyze and compare the filings and which can give meaning to raw details.

The comparison of performance and pay is another popular way of evaluating. But unfortunately, many executives are still being paid with bonuses and raises though their companies are faltering. So in this comparison of performance and pay, overpaying can be determined. And this is determined through the prices of stock. When the stock price will outpace change of pay, they were not being overpaid.

The second popular way of evaluating is the peer comparison. By this process, executives are compared to the industry peers. For market leaders, their CEO will be paid more slightly than their industries. Most of the executives should be paid on par with their peers.

A lot of laws are now passed that will help satisfying the investor concerns about compensation. Some other laws are passed that directs more on company practices. One example is removing tax shelter, in which the result is avoiding the company to pay millions of their taxes.

In conclusion, this consideration is very important for investors in making decisions. If an executive is not properly compensated, this may result to the cost of money in shareholders. Also, it decreases share prices and profits.




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