Page 528 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

514 The Complete Guide to Executive Compensation

Percentage of Salary Paid Versus Three-Year Compound EPS
Grade Below 8 8.0–9.9 10.0–11.9 12.0–14.9 15.0 and Up

35 0 75 150 225 300

34 0 70 140 210 280
33 0 65 130 195 260

32 0 60 120 180 240

31 0 55 110 165 220
30 0 50 100 150 200

29 0 45 90 135 180

28 0 40 80 120 160
27 0 35 70 105 140

26 0 30 60 90 120

25 0 25 50 75 100

Table 8-92. Performance-percentage plan

Plan Start Payment Vest
Time Lapse Now Three years
Individual
• Ordinary income 0 $150,000
• Long-term capital gains 0 0
Company
• Tax deduction 0 $150,000
• Expense* 150,000

* Accrued over period to vest date
Table 8-93. Performance plans without stock

The disadvantages include the following:
• The executive has no opportunity to share in the increase in stock price, nor is there
an opportunity for favorable long-term capital gains tax treatment.
• The company has a variable charge to earnings and the tax deduction is deferred to a
future date.