Executive compensation

Executive compensation is composed of both the financial compensation (executive pay) and other non-financial benefits received by an executive from their employing firm in return for their service. It is typically a mixture of fixed salary, variable performance-based bonuses (cash, shares, or call options on the company stock) and benefits and other perquisites all ideally configured to take into account government regulations, tax law, the desires of the organization and the executive.^[1]

The three decades from the 1980s saw a dramatic rise in executive pay relative to that of an average worker's wage in the United States,^[2] and to a lesser extent in a number of other countries. Observers differ as to whether this rise is a natural and beneficial result of competition for scarce business talent that can add greatly to stockholder value in large companies, or a socially harmful phenomenon brought about by social and political changes that have given executives greater control over their own pay.^[3][4] Recent studies have indicated that executive compensation should be better aligned with social goals^[5] (e.g. public health goals^[6]). The rate of executive pay is an important part of corporate governance, and is often determined by a company's board of directors.