Benefits and perquisites as a part of executive compensation management strategy.

Executive compensation management will extend into exclusive non-cash benefits

Executives are subject to two kinds of benefits as part of their compensation management plan. One part includes all of the standard benefits where all employees participate. The second are executive benefits – exclusive and special to the executive grades of the company – supplemental retirement plans, enhanced medical coverage, enhanced long-term disability, contract severance that may be beyond what would normally be paid, longer vacations. These are interesting things because we’re finding some companies or executives are giving up these kinds of benefits partially because of cost but in a lot of cases because they just don’t want to appear that they’re taking more than other people are getting. Executive now are being taught to lead by example and eschewing the use of exclusive benefits. This shows solidarity with the employees and cost-consciousness to the shareholders

Along the same lines are perquisites in their compensation management plan, which are things like company cars, private use of corporate aircraft, financial planning ,and membership in golf and social clubs. The trend that we’re seeing has been a lot of companies are abandoning the use of golf club. CEOs’ are saying, “I don’t need country clubs being paid for anymore. I’ll pay for them myself, because I don’t want it to appear in the financial disclosures that I’ve got to publish.”

And also when we look at all of these items, there is really no tax advantage that comes along to the executives since – well there may be some for corporate aircraft – but in general they’re going to have to pay for the value of the compensation management benefit that they are receiving.

Edited remarks from the Rapid Learning Institute webinar-Executive Compensation: What Worked and What’s Fair by Steve Hall