Executive compensation is handled differently from employee pay in most public companies, privately held companies, and even tax-exempt organizations. The average CEO in the United States earns much less than those who head Fortune 100 companies. In fact, the Bureau of Labor Statistics reports that for the 250,000 CEOs in the United States, average annual salary was approximately $200,000.
Executive compensation refers to the financial payments and non monetary benefits provided to high level management in exchange for their work on behalf of an organization. At the heart of most executive compensation plans is the idea that executives should be rewarded if the organization grows in profitability and value over a period of years and be penalized if the executive fails to produce positive results.
Executives are often interested in compensation and the mix of items in the total package because it affects the amount of actual value after taxes. The type of job, the size of the organization, the industry, and other factors all influence executive salaries. In addition to the regular benefits received by all employees, executives often also receive perquisites. Perquisites (perks) are special benefits - usually noncash items - for executives.
A compensation committee, which is a subgroup of the board of directors, generally has authority over executive compensation plans. In addition, shareholders of public corporations have the right to vote on executive pay packages.
