Executive compensation

Executive compensation is the pay and benefits awarded to senior corporate managers. It commonly combines salary, annual incentives, long-term awards, and retirement or other benefits.

Base salary: Fixed cash compensation paid to an employee, usually at regular intervals. It supplies the fixed-pay component of an executive’s compensation package.
Pay-for-performance: A compensation approach that varies rewards according to measured performance. It is the central rationale for tying executive rewards to targets and outcomes.
CEO pay ratio: A comparison of a chief executive’s annual compensation with the median compensation of the company’s employees. It places top pay alongside the compensation of the wider workforce.
Say-on-pay: A shareholder vote on a company’s executive compensation, usually advisory rather than binding. It contrasts board-led pay decisions with direct shareholder feedback.
Corporate governance: The system of rules, relationships, and processes through which a company is directed and controlled. Executive pay is one of the board’s main tools for overseeing management.
Annual bonus: Variable cash compensation tied to performance over a short period, typically one year. It rewards executives against annual financial or operational targets.
Vesting: The process by which an employee earns an irrevocable right to an award or benefit over time or after conditions are met. Vesting schedules determine when equity awards become the executive’s property.
Total shareholder return: An investment return that combines share-price change with reinvested dividends. Companies often use it to assess executives’ long-term performance against investors’ returns.
Worker cooperative: A business owned and democratically controlled by its workers. Its ownership and decision structure offers an alternative to concentrated executive authority.
Principal–agent problem: A conflict that arises when an agent’s interests or information differ from those of a principal. Shareholders delegate company decisions to executives whose motives may not match their own.

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