Executive Compensation and Benefits

Equity. Many times, executives ask for equity in a company instead of cash. The amount of stock options you give senior-level employees will depend on your industry and the valuation of your stock. To get an idea about what you might offer, take a look at the proxy statements of a few public companies that are comparable to your own. These documents usually list executive compensation. Some companies offer executives a higher percentage of equity each year, based on company performance or shareholder return.

Flexible schedules. A flexible work schedule can be extremely effective in enticing top talent. Employers who offer flexible scheduling in flextime or compressed workweeks, in geography (telecommuting or satellite workplaces), in time off (floating holidays or vacation carryover), and in career paths (job sharing or part-time work) have an advantage in attracting top candidates.

Deferred compensation. Stock options and other deferred compensation plans are effective tools for retaining employees because they reward employees based on the company's performance over time (typically three to five years). Deferred compensation plans are an investment vehicle that allows people to defer taxation of both the initial contribution and the earnings on the deferred assets.

Performance incentives. Performance incentives are special incentives — shares of stock, cash, vacations, or other bonuses — tied to the performance of the department or business area that the executive manages. Performance incentives linked to long-term goals create vision that can inspire an executive to remain committed to a company.

Other types of compensation. Be creative when you develop executive compensation plans. Consider all types of options, including car allowances, life insurance, relocation payments, flexible start dates, signing bonuses, use of company-owned vacation property, health-club membership, tuition reimbursements, and other compensation that will make your package competitive and attractive. Offering nonmonetary incentives like these will tempt talented candidates and help you retain them.