The call for a change in mindset and practices
Executive compensation is firmly on the social, political and regulatory agenda today. The level of executive pay has been constantly rising for decades, particularly in comparison with the average workers’ pay.
There is a debate over whether such high executive pay is justified by the skills and results of business leaders or a socially unacceptable phenomenon that should be controlled. Moreover, there is a question mark over whether typical remuneration package components such as share options are effective in encouraging long-term decisions. Furthermore, the economic crisis and government bailout were a strong catalyst in this debate and led governments and regulators to act under the social pressure.
This raises a number of questions, but three are particularly interesting: Why are executive remuneration practices at the top of the agenda? What are the trends influencing executive compensation? How do companies adapt to these trends?
What’s the problem?
An executive’s remuneration package typically comprises a fixed salary, together with a range of benefits in kind, a performance bonus and long-term incentives (such as shares and options). The package should be balanced between the fixed and variable parts, and in terms of payment in cash or financial instruments.
Inside magazine issue 5 – June 2014
Inside is Deloitte’s quarterly magazine offering an exclusive insight into best practices, trends and opportunities faced by our clients across all industries.
Inside focuses on the main hot topics relevant for the market (Asset management, Banking, Insurance, Public sector, Healthcare, Private equity, Real estate, TMT, Manufacturing and consumer business, Transport and logistics).