Page 410 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

396 The Complete Guide to Executive Compensation

a major research discovery or outstanding financial contribution to the corporation (with
perhaps a minimum value of $25,000). In between are various levels of departmental and
divisional awards, all with different levels of accomplishment and payouts.
One problem with such programs is defining the level of contribution necessary to
qualify for an award. In addition, financial controls and feedback procedures have to be
established to ensure interunit equity.
Companies with such programs must ensure that they are not used to compensate for
poorly performing short-term incentive programs. Normally, such misuse occurs only with
programs that are approved within a division. A review of the number and size of awards by
organization level, coupled with special attention to individuals repeating as recipients,
should indicate degree of misuse. Because of their low dollar amounts (except for a research
discovery), these awards are of little value to executives.
Executive Succession Award

Occasionally, a special bonus perhaps equal to salary is given to a CEO for effecting a smooth
transition with the successor.

Hiring Bonus
A hiring bonus (typically for executive talent) is used to induce an individual to leave his or
her current employer and join the hiring company. It may also be called a front-end bonus,
acceptance bonus, sign-on bonus, the golden hook, or the golden hello. The amount is at least
the cash equivalent of unvested payments left behind. It may also include a present-value
estimate of future value of these forfeited benefits as well as awards that would have been
made if the person remained with his or her current employer. This bonus can be very
attractive and lucrative to highly placed executives. The award may be paid in installments
and subject to repayment if the executive leaves before a specified period.
Guaranteed Bonus

Like the hiring bonus, the guaranteed bonus typically applies to a new hire. Whereas the
hiring bonus is to compensate for forfeited unvested payments, the guaranteed bonus is a
one-year commitment by the company to pay a stated minimum year-end bonus. Rather than
replace the annual pay of the previous employer all in salary, the company agrees to a portion
in a one-year guaranteed bonus. If performance exceeds the guaranteed minimum, the higher
payment will be made. If it falls short of the guaranteed amount, the guarantee will be paid.

Leave Bonus
This is actually separation pay and is covered in some detail in Chapter 6 (“Employee Benefits
and Perquisites”). In addition to a formal policy and an employment agreement, some compa-
nies find it so important to remove an executive quickly and without legal problems that a
“sweetener” is added, occasionally exceeding the annual output of sugar-producing countries.
It is sometimes called the golden boot.

Retention Award
In addition to or in lieu of deferred compensation, an executive may also receive an award
(one-time or annually) that will be paid if he or she is on the payroll at a prescribed point in