Page 71 - Appreciating Organization's Biggest Assets

options and other long-term shareholders value. These executives
performance plans tied to total know which factors of performance
shareholder return or financial are important to be focused on to
performance achieve the business objective and

Benefits plan: earn more personal remuneration.
If the share prices increase,
This is designed by me and can compensation is high for executives
vary according to organization and on the same hand, shareholders
objectives. also enjoy the profits. This is a win
– win scenario. But when stock
prices decrease, the compensation
of executives reduces. So those firms
who rely heavily on stock option or
long term incentive component find
difficult to retain and motivate their
executives. Also to keep the stocks
Executives take – home salary for moving up in the market, executives
executives is lower due to taxes. If can focus on the upcoming quarters
executives get 100% base amount as while ignoring the shareholders
salary, they know they will get the interest which would weaken the
salary by the month end irrespective link between them.
of how they perform. Hence salary
of executives should be linked to Conclusion
the firm’s performance so that their Compensation structures
pay is based on firm’s performance. for executives should be kept
While annual incentives depend proportionate to the performance.
on executives overall performance Over- paying and over-
throughout the year reflecting his compensating our important top
or her efficiency in taking decisions, management like executives and
bonuses motivate executives to CEOs should not be followed.
work more for that extra incentive. Instead, their compensation
A pay for performance trend should be designed in such a way
highlights the importance of that a part of their pay depends on
performance vested restricted company’s performance. Salaries,
stocks for top levels. Larger part of incentives and other remunerations
the executives’ compensation tied should be designed in such a way
to long term incentives focuses that executives would be highly
on organizations performance in rewarded for superior performance
the long run helping to maximize
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