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Those "other forms" can be quite creative. Hollis Gonerka Bart, a partner at Withers Worldwide, where she leads the Litigation and Employment practice group, regularly represents senior executives and CEOs in the structuring and negotiation of compensation packages and incentive plans. Increasingly, companies are personalizing their compensation packages to attract the best and brightest and, rather than offering huge perks, the trend is toward more long-term incentives.
"I hear, 'This is what we're paying, and we'd love to have you, but that's about it,'" said Bart. "In general, we're not seeing big packages. Instead, there are long-term incentives, driven by deferred compensation. If a company is doing it right, it should be building incentives into the company's five-year plan, tying portions of compensation to tenure and achieving targets set by the board of directors."
Today's CEO is very involved in negotiating the terms of his or her contract, particularly the target he or she is required to meet. At the same time, today's boards of directors, said Bart, are not hesitant to fire "for cause." That no longer suggests inappropriate or egregious behavior on the part of the executive, she explained, but can simply mean not hitting performance goals. It's imperative, therefore, for the CEO to be personally involved in creating the compensation package.
"Working out the goals together ensures the goals are meaningful, and it creates a dialogue between the executive and the board from the very beginning. It gives the executive a seat at the table," Bart said.
Sometimes that seat at the table makes some additional requests. Bart related a case in which a CEO was relocated from the East Coast to the West Coast in the middle of the school year. The company agreed to pay $20,000 in travel costs so that the CEO's family could regularly visit, plus it agreed to shoulder any tuition monies the family might lose due to the move. But the CEO asked that, in addition to typical relocation costs, the firm also pay to move his substantial art and wine collections. The board agreed.
A good compensation plan also includes retention incentives that inspire executives to stay with the company and not look for a "resume-building" opportunity elsewhere. They are motivated to continue working because the goals are attainable, lucrative -- nobody wants to leave money on the table, after all -- and are aligned with the interests of the shareholders.
NEXT: CEO Compensation And Shareholder Goals
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