Components of an Executive Compensation Plan

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The components of an executive compensation plan vary widely across companies. How incentive vehicles are structured and implemented vary even more widely. Below are the most common components of an executive compensation plan:

Base Salary

The standard wage paid to an executive that typically is the largest share of an annual compensation package.

Bonuses (Short-term incentives)

Distributions for annual milestones or reaching incentivized goals that are typically cash-based.

Long-term incentives

Vehicles used to share long-term value creation with employees. These are often tied to equity or enterprise value.

Benefits

Non-cash compensation provided to an employee on an annual basis. These typically include elements like health and life insurance, defined benefit or contribution plans, and paid vacations.

Perquisites

Privileged grants to employees in addition to their other compensation. These can include everything from a company car to a business-paid cell phone.

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