Page 272 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

258 The Complete Guide to Executive Compensation

Job Title
The job title is a very visible perquisite and entirely intrinsic compensation conferring status
on the recipient. It may also be a way of defining levels of signature authority or of defining
the level of pay-program participation (e.g., number of stock options). Titles are often tied
to salary and/or organization levels. In many instances, they have modifiers to denote corpo-
rate versus group or divisional level. While corporate officer titles require board of director
approval, the approval of group or divisional titles is most likely at the discretion of the com-
pany CEO. Central approval is essential to minimize interunit inequities. This requires that
the eligibility basis for each title be carefully considered, be it organizational level, scope of
responsibilities, or other criteria. Furthermore, these criteria should be widely communicated
to minimize confusion and unrealizable expectations. New hires and acquisition/merger
individuals should not be allowed to carry loftier former titles than their current responsi-
bilities permit, unless it is only one or two exceptions that will disappear in a brief period of
time. Long-time exceptions will put pressure on “title creep” as others also look to become
exceptions.
“Vice president” is a very popular title. In addition to the vertical array of assistant VP,
VP, senior VP, and executive VP, these titles can be used at the corporate, group, or division
levels. Given all the possible combinations, it is easy to be awash in vice presidents. To
minimize confusion, no one should report to someone with the same title unless that person
is in a higher corporate grouping. For example, a group vice president could not report to
another group vice president but could report to a corporate group vice president. But it can
become more confusing when modifiers such as executive and senior precede the title
“vice president.” Assuming that the former is loftier than the latter, is a “senior corporate vice
president” greater than, equal to, or less than an “executive group vice president”? These are
questions the title holders (and others) ask, so it is important to make these decisions before
awarding the title modifiers. One modifier that is working its way down the organization is
chief; it once applied only to the top executive officer—the CEO, or chief executive officer.
Now it is also being given to those at the top of their own functional pyramid (e.g., Chief
Human Resources Officer).
While pay range usually goes with title, in many situations companies use titles instead of
increased pay. The result has been that in many organizations, especially those in the mature
phase, growth in number of vice presidents is faster than growth in sales! The after-tax
value of a job title is infinite, since there is no pay to the executive and no expense to the
organization. The new hefty title may not put more groceries on the table, but for those who
receive it, the basic necessities of life are already being met. The title of vice president is
intended to officially recognize the importance of the individual. Unfortunately, as additional
vice presidents are created, the value of the title diminishes. First to suffer are the true vice
presidents. Their status is denoted by such prefixes as corporate, group, and divisional or execu-
tive, administrative, and senior. While these distinctions are helpful, much of the glitter origi-
nally part of being a vice president is gone. Nonetheless, title is a high-importance factor for
most executives and, like few other perks, incurs no income tax liability or company expense.

Matching Gifts
A very popular program with executives is the matching gifts plan, through which a contribu-
tion made by the employee to a civic, cultural, education, or health-care organization (recog-
nized by the IRS as a 501(c)(3) tax-exempt organization) is matched dollar for dollar by the