tthrm22payforperformance2_10

Executivecompensation executivecompensation reform

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Unformatted text preview: sized at the expense of research and development. Emphasis is placed upon equaling or exceeding executive salary survey averages. Benefits do not relate closely to individual performance. Executive Compensation Executive Compensation Reform Current Reform Measures The Internal Revenue Service (IRS) is looking for tax­ code violations in executive pay packages and will make executive pay a part of corporate audits. The Securities and Exchange Commission issued pay disclosure rules which require companies listed on the New York Stock Exchange and NASDAQ to disclose the true size of their top executive pay packages. The Financial Accounting Standards Board (FASB) now requires that stock options be recognized as an expense on income statements. Executive Compensation Executive Compensation Reform (cont’d) Other Reform Measures: The adoption of performance formulas that peg executive compensation to organizational benchmarks other than stock price Shareholder resolutions that allow shareholders the right to vote on executive pay packages Greater accountability by compensation committees to justify large executive pay awards or severance or retirement packages Group Incentive Plans Group Incentive Plans Team Incentive Plans Compensation plans where all team members receive an incentive bonus payment when production or service standards are met or exceeded. Establishing Team Incentive Payments Set performance measures upon which incentive payments are based Determine the size of the incentive bonus. Create a payout formula and fully explain to employees how payouts will be distributed. Team Incentive Plans (cont’d) Team Incentive Plans (cont’d) Advantages Team incentives support group planning and problem solving, thereby building a team culture. The contributions of individual employees depend on group cooperation. Team incentives can broaden the scope of the contribution that employees are motivated to make. Team bonuses tend to reduce employee jealousies and complaints over “tight” or “loose” i...
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