Compensation for executive managers is different from compensation for other employees in most organizations. Executive compensation covers employees that include company presidents, chief executive officers (CEOs), chief financial officers (CFOs), vice presidents, occasionally directors, and other upper-level managers. These high level employees are paid executive compensation.
Executive compensation is different from compensation for lower-level employees. The salary and other benefits are negotiated and are documented in a customized employment contract. The contract spells out compensation, benefits, perquisites, performance bonuses, separation and severance agreements, and other special terms of employment.
Executive compensation often includes:
- base salary,
- incentives such as stock options,
- income protection guarantees in the event of a sale, public stock offering, or other liquidity event,
- a guaranteed severance package in the instance of employment termination for reasons other than cause,
- a signing bonus for coming onboard,
- additional executive-only benefits such as additional paid vacation, and
- perquisites (perks).
The combination of salary, incentives, and bonuses is often referred to as Total Cash Compensation (TCC) for executives.
Executive compensation is negotiated between the potential executive and the employer. Where non-executive compensation is most often similar in characteristics among employees, executive compensation is negotiated and agreed to in an employment contract and may include substantial differences from the organizational norm.