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Top 5 Ways to Improve Executive Compensation

  • Know your value — Start by gathering data.  What are other executives paid, in your own industry and your own company?  How has your company performed, compared to your industry peers as well as you own benchmarks?  How have you performed?  Are their particular compensation trends impacting your position?  If your company has been performing particularly well or if you are headhunted for a new executive position, you may be worth more than you think.

 

  • Don’t be afraid to negotiate, but align your interests  While base executive pay has been falling in recent years, more and more companies now offer “pay-for-performance,” and if you understand your value then you have room.  The key is aligning your interests with the company’s.  Ask yourself a simple question:  does your compensation package give you the incentive to achieve the company’s goals?  For example, a bonus plan targeted to increasing revenue may only encourage low-profit, high-revenue sales.  Is that your company goal?  Lofty goals prove similarly ineffective.  Better to work through your company’s strategic plan and approach your Board of Directors with an incentive package that has everyone facing the same direction.

 

 

  • Understand the terms — Frequently, even experienced executives fail to fully understand the terms of their own deal.  Between all the clauses and different types of stock, it can be a bit confusing.  But, small tweaks can yield significant results.  Look a bit more closely at your employment documents, and review our executive compensation FAQs here.

 

  • Take the long-term view — This applies to two separate areas of executive compensation.  First, when you negotiate the deal, try to see through the smaller, short-term stumbling blocks.  Are they important to your goals?  For example, if multi-year stock vesting troubles you, add accelerators.  If your starting salary is too low, add incremental pay raises tied to performance metrics or time.  Second, take note of the company’s realistic plans.  Are the stock grants truly valuable?  Are they buried under preferred stock, convertible debt or other senior obligations?

 

  • Get good advice — Your company’s lawyers and accountants look out for your company, much like you do, taking advantage of every chance to benefit the organization.  But who’s watching out for you?

 

If you would like to speak with one of our attorneys about any questions or concerns you may have, please contact us today.

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