Bonuses for top executives primarily based on profit

Bonuses for top executives primarily based on profit

Cash bonuses for executives are primarily tied to organizational financial performance according to the 2006 HR Practices in Executive-Level Compensation Survey Report by the Society for Human Resource Management (SHRM) in the US.

“Organizations reward top executives for delivering profit growth and increasing revenue. It is important to remember that creating a work environment that fosters high performance directly impacts profit,” said Susan R. Meisinger, President and CEO of SHRM.

Although not all executive-level cash bonuses were contingent on financial performance, 59 percent of bonuses were impacted by gross/net revenue, 54 percent by profit growth, 40 percent by cost containment, and 35 percent by customer satisfaction levels.

Executive-level employees are far more likely to receive performance-based cash bonuses and stock options (76 and 28 percent, respectively), than non-management employees (43 and 9 percent, respectively) at all organizations. Stock options for executive-level employees were offered by 79 percent of publicly owned companies and just 27 percent of privately owned companies. However, there has been some movement on the level of restricted stock options for executive-level employees over the past two years as 23 percent of survey respondents report that there has been a decrease in the use of restricted stocks for executives.

Perks for executives do not stop at pay, bonuses, and stock options. Of them,84 percent are given cell phones, 71 percent receive relocation expenses, 59 percent are provided with company cars, 38 percent get special vacation allowances, 27 percent get country club or health club memberships, 26 percent get tickets for sports or entertainment events, and 10 percent have use of a company airplane.