Page 24 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

10 The Complete Guide to Executive Compensation

Total Compensation

Element $100,000 $250,000 $500,000 $1,000,000 $5,000,000
Salary 100% 100% 100% 100% 100%

Employee benefits 20.0% 20.0% 20.0% 20.0% 20.0%
Perquisites — 1.8% 5.0% 13.3% 30.0%

Short-term Incentives 10.7% 23.6% 40.0% 60.0% 100.0%
Long-term Incentives 2.7% 36.4% 85.0% 140.0% 250.0%

Total 133.4% 181.8% 250% 333.3% 500%
Table 1-6. Percentage relationship of elements to salary

The relative importance of each element at the different income levels would, of course,
vary from industry to industry and even within a given industry from company to company.
It will also be different for privately held companies and nonprofits.

Total Compensation

Element $100,000 $250,000 $500,000 $1,000,000 $5,000,000
Salary $75,000 $137,500 $200,000 $300,000 $1,000,000

Short-term Incentives $8,000 $32,500 $80,000 $180,000 $1,000,000
Total $83,000 $170,000 $280,000 $480,000 $2,000,000

Employee benefits $15,000 $27,500 $40,000 $60,000 $200,000
% of total 18.1% 16.2% 14.3% 12.5% 10.0%

% of salary 20.0% 20.0% 20.0% 20.0% 20.0%
Benefits and perquisites $15,000 $30,000 $50,000 $100,000 $500,000

% of total 18.1% 17.6% 17.9% 20.8% 25.0%
% of salary 20.0% 21.8% 25.0% 33.3% 50.0%

Table 1-7. Employee benefits in relation to salary and short-term incentives

Compensation Design Considerations

Having defined executive and described compensation, let’s identify the factors that affect the
design of the pay program. Design considerations are covered in significant detail in Chapter
9, but it is important to highlight some of the basic factors at this point. They are illustrated