Compensation for Business Leaders

Perquisites

Business leaders (particularly key executives) often receive special benefits, called perquisites, which promote key employee retention. In the U.S., perquisites have come under great scrutiny and various new regulations appear focused on these executive compensation practices. Perquisites are reported in the "All Other Compensation" for U.S. SEC compensation disclosures and the current threshold for disclosing perquisites is for amounts exceeding $10,000.

Organizations that tend to over-emphasize perquisites and short- and long-term incentives (such as equity compensation), are sometimes said to use "golden handcuffs." These are rewards designed to discourage executives from leaving an organization. In addition to competitive short- and long-term incentive plans, the following are examples of executive perquisites in the U.S.:

Many perquisites are taxable to the employee.

Insurance

Group life insurance coverage for business leaders is inexpensive, although as a multiple of salary, it does create a greater cost. Key executives often receive additional life insurance and special types of insurance, such as travel insurance. Long-term disability insurance is another element and one of the few where U.S. organizations can discriminate. Another type of life insurance policy is company-owned life insurance, which is taken out by a company on the lives of business leaders considered to be vital to its operation. Under this type of plan, the company in question pays the premium on the insurance but is also the plan's primary beneficiary. Each of these types of insurance has its own tax rules that vary by state.

Time Off

Although their time-off provisions are the same or more than for other employees, business leaders tend to not take advantage of vacation time as readily as other groups. It is sometimes necessary to insist they take time off since a large financial liability can arise for the organization if a category such as vacation is allowed to accumulate or accrue over time. (Special work rules, tax, and HR codes may exist by state regarding carry-over and caps related to paid time off.)