Compensation Chapter 14
In exchange for the risk, directors are well rewarded typically?
$240,000 for 30-40 hours of work a month
What are the components of a executive compensation package?
-Base Salary -Annual bonuses -Long Term Incentives -Benefits -Prerequisites
ERISA requires they not be to far above other, the plans must also:
-Cover a cross-section of employees -Provide definitely determinable benefits -Meet vesting and nondiscrimination requirements
What are the types of special groups?
-Supervisors -Top Management -Board of Directors -Professional Employees -Sales Staff -Contingent Workers
What are the six major factors that influence the design of sales compensation packages?
1. The natures of people who enter sales 2. Organizational strategy 3. Market maturity 4. Competitor practices 5. Economic environment 6. Product to be sold
What are the two types of compensation plans?
1. Unit Rate plans 2. Add-on plans
CEO pay averages?
14.3 million
Try to get sales staff to focus on specific types of sales
Add-on plans
Incorporates the political motivations in the corporate world
Agency theory
Face possibility that disgruntled stockholders may sue over corporate strategies that don't "pan out"
Board of Directors
Plan an important "safety valve" role for companies. When demand is high more are hired; when demand drops, they are the first workers downsized. Employment status is highly insecure and challenge is to find low-cost ways to motivate.
Contingent Workers.
A board of directors provides strategic advice, usually 8-11 directors
Corporate directors
Sales staff are linked to?
Customers
Provides two ways of progressing in an organization
Dual-career ladder
A major compensation problem in contingent workers is?
Equity
Sales staff professionals require
High initiative and low supervision
Purchase of stock at a stipulated price, conforming with Internal Revenue Code.
Incentive Stock Options
Purchase of stock at a stipulated price, not conforming with Internal Revenue Code
Non-qualified Stock Options
Cash or stock award earned through achieving specific goals
Performance share/unit plans
Cash or stock award determined by increase in stock price at a fixed future date.
Phantom Stock Plans
May be torn between goals, objectives, and ethical standards of their profession and demands of an employer concerned more with the profit motive.
Professional Employees
According the Fair Labor Standards Act, this category includes any person who has received special training of a scientific or intellectual nature and who job does not entail more than a 20% time allocation for lower-level duties. Scientists and engineers are classified as this.
Professionals
Grant of stock at a reduced price with the condition that it may not be sold before a specified date.
Restricted stock plans
Often go for extended periods in the field with little supervision. Challenge is to stay motivated and continue making sales calls even in the face of limited contact and scrutiny from manager. Conflict is inevitable between customers who want product now and production facilities that can't deliver that quickly
Sales Staff
Cash or stock award determined by increase in stock price during any time chosen by the executive in the option period
Stock appreciation rights
Caught between upper management and employees. Must balance need to achieve organization's with importance of helping employees satisfy personal needs. If unsuccessful, either corporate profit or employee morale suffers.
Supervisors
Companies may capture the true value of compensation package using a?
Talley sheet
Stockholders want healthy return on investment. Government wants compliance with laws. Executives must decide between strategies that maximize short-run gains at expense of long run vs. directions that focus on long run.
Top management
Differ by the amount of pay for each unit of sales
Unit rate plans
