Page 115 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)
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Chapter 4. The Stakeholders 101
Other
Shareholders Executives
Employees
Board of Watchdogs Executive
Directors Pay
Compensation
Suppliers Customers
Committee Community
Rulemakers The Press
Figure 4-1. Executive compensation stakeholders and rulemakers
shared with the shareholders. That said, shareholders will be willing to compensate the
executives for the company’s success. Since this is a book about executive compensation, let’s
begin with the executives.
THE EXECUTIVE
As stated at the outset, an executive is not simply the CEO, or the corporate officers, or those
defined by the Securities and Exchange Commission (SEC) as “insiders,” but any and all
high-level individuals who can have a significant impact on the success of the organization.
They participate in all five compensation elements. Through their efforts, executives
exchange their human capital for pay (or financial capital). The management pyramid is
shown in Figure 4-2.
CEO
Top
management
Senior
management
Middle
management
Figure 4-2. Management pyramid
The five compensation elements have different impacts on attracting, retaining, and
motivating the executive—the basic requirements of a positive pay package. Table 4-1 shows
the five elements in terms of these three requirements.
