The remuneration of Executives

As business consultants, we have recommended to executives seeking new job opportunities to assess their potential employers based on the total remuneration package, now called "total rewards", including benefits, bonuses and additional privileges. Recently, the company Equilar, an expert on wage survey, conducted a study detailing some tendencies on "total rewards" of senior executives of the 95 largest public companies by revenue in the United States.

The Equilar tracked nine main areas of additional privileges, including benefits related to housing, personal and home insurance as well as buying property club titles. The study this year reported that the average values of seven of the nine main advantages that CEOs currently have decreased.

The rules of the new Securities and Exchange Commission (SEC) require companies to disclose the additional privileges that exceed the amount of $ 10,000; previously the limit to be reported was $ 50,000. It is therefore no surprise that this new limit has generated a reduction in the level of spending on additional privileges. While in large public companies surveyed still there are two areas that are high spending in other sectors of the economy in general, executives are getting about the same or slightly less privileges than last year.

From 2006 to 2007, the average value of the additional bonuses and privileges relating to financial benefits fell by 9.2%, as well as spending on personal use of corporate aircraft fell by 9.8%.

These decreases reflect the concern of the boards to control and monitor excessive public spending. In fact, some companies are reporting data, in addition to required by law, to demonstrate transparency in their attitudes.

Only two areas showed growth. First, the extra money to offset taxes on income attributed the benefits of the bill, rose unexpectedly by 43.6% in 2007. Second, the average value of benefits relating to personal and home insurance for these executives showed an increase 14.4%.

These trends reflect that private organizations have an advantage over the others, mainly because they do not have obligation to disclose spending on additional bonuses and privileges, and may have more flexibility in recruiting executives without worrying about the requirements of the SEC.

Copyright 2006 by the The Herman Group.
Reproduction is permitted provided that the source is acknowledged with.
Articles Roger Herman and Joyce Gioya, Business Futurists and associated consultants TDC Professional Training.
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Published on 03/09/2008.

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