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What Are the Different Components of Executive Compensation Packages?

A company car and driver might be one perk that comes with being an executive.
Flights on chartered aircraft may be part of an executive compensation package.
Stock options are often a large part of an executive’s or board of director’s remuneration.
Executive compensation packages include medical insurance.
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  • Written By: Osmand Vitez
  • Edited By: PJP Schroeder
  • Last Modified Date: 28 October 2014
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Executive compensation packages can include a number of options that most employees do not receive as part of their remuneration. These packages typically include a salary, perquisites, and stock options if the company is publicly held. Not all executives receive the same amount of compensation or benefits in their pay packages. The items a company includes in executive compensation packages vary based on experience, work load, and the ability for an executive to achieve certain goals and standards. In some cases, the chief executive officer may receive the best package, with other executives receiving compensation packages commiserate with their work levels.

The salary may actually be the smallest part of executive compensation packages. This number represents the initial agreed-upon remuneration for working a certain position within a company. Salaries for executive-level positions in large companies or those that are publicly held can be in the higher six or low seven figures. Again, salary levels mostly fall in line with an individual’s work experience and track record of running other large companies. Some executives may work on a tiered scale with salary increases for hitting certain performance levels in terms of revenue, profit, or other goals.

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Perquisites — often called perks — represent any benefits an executive may receive in addition to standard salaries or other remuneration. Executive perks can be quite different than other employees; an executive often receive perks such as private jets, a car and driver, health club membership, golf club membership, or similar items. These items in executive compensation packages are often in addition to standard perks or benefits that include medical insurance and discount plans. Companies usually offer perquisites in order to retain executives for long periods of time, especially when work is highly demanding. For example, a CEO may not enjoy a lot of private time off, so a country club membership allows the individual to enjoy some working time off.

Stock options and large retirement packages that include stock typically represent the most financially rewarding portion of executive compensation packages. Here, a company offers stock to an executive at various points of the individual’s working career. The stock usually carries little or no cost to the executive; the options to purchase this stock are likely automatic. Executive compensation packages may not be able to sell their stock immediately. Again, the stock option or retirement package states certain points where the executive can sell stock and gain financially.

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