{"id":727,"date":"2019-08-14T21:00:22","date_gmt":"2019-08-14T15:30:22","guid":{"rendered":"https:\/\/www.complianceprime.com\/blog\/?p=727"},"modified":"2024-05-10T12:17:09","modified_gmt":"2024-05-10T06:47:09","slug":"executive-compensation-regulation","status":"publish","type":"post","link":"https:\/\/www.complianceprime.com\/blog\/2019\/08\/14\/executive-compensation-regulation\/","title":{"rendered":"Executive Compensation Regulation"},"content":{"rendered":"

Executive compensation is an evolving subject influenced by the pulls and pushes of corporate governance, legislations, Executive Compensation Regulations, lack of astute business talent and business performance. However, in general, executive compensation is way beyond the compensation of workers.\u00a0<\/span><\/p>\n

Executive compensation is often a combination of various elements that don\u2019t form a part of workers’ compensation. This includes long term incentive plans, <\/span>employee benefits<\/span><\/a>, perquisites, health insurance, short term insurance, bonus, etc. This is apart from the base pay and is often referred to as Total Cash Compensation. However, executives are often paid more than cash compensation. They are also paid with stock options. Since this is in the form of options, the executive can exercise the option at a later date and encash the option. It must also be said that stock options entail less <\/span>executive taxation<\/b> compared to the total cash component.\u00a0<\/span><\/p>\n

Executives are also paid with bonuses which are usually formula-driven and have some kind of attached performance criteria. It all depends on the role of the executive. So, while a bonus for a Sales Director may be pegged to incremental growth of revenue; a CEO’s bonus may be pegged to incremental profitability. However, the executive bonus comes under the ambit of <\/span>executive taxation<\/b><\/a> rules.<\/span>\u00a0<\/b><\/p>\n

There is no doubt executives get much more than their base pay and bonus. However, it must be kept in mind that there is a regulatory framework to decide the compensation of executives. In this regard, it is a good idea to start with reforms of 2010 in the wake of the crisis that engulfed the US financial market and dragged the global financial and money market indices along with it.\u00a0<\/span><\/p>\n

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Dodd-Frank Act<\/span><\/h2>\n

This act was signed into law in 2010 when the shadow of the 2008 housing meltdown and financial crisis was still looming large. The law is a set of regulations devised to reform the financial system. Basically, it is a set of provisions for corporate governance specifically aimed at regulating executive compensation in the public companies of the USA. The law maintains that the Board of Directors has to:<\/span><\/p>\n