Making the Right Choice on Executive Compensation

executive compensation

In business, it is absolutely vital that every individual is given the right treatment with regard to employment law. For many businesses, though, one of the hardest financial aspects to juggle revolves around executive compensation. Giving an executive the right payoff in terms of compensation is very important. Trying to negotiate this with an executive, though, can be tough.

They might disagree about the reason(s) for being asked to leave the company. They might feel as if they are being pushed out of the door. They might even wish to receive a larger compensation. By failing to provide proper compensation, though, a company could be falling foul of employment law in their particular location. With that in mind, it always helps to consult legal experts, such as Chauvel & Glatt, to make sure the right decisions on executive compensation are being made.

This helps the company ensure that any executive compensation is agreed to within the remit of what should be legally provided. Given that many companies have issues with their corporate image due to the high pay rate for CEOs and other executives compared to median workers, though, it is important that compensation is dealt with in a fair manner.

It would be wise for any business looking to build a strong executive structure built on performance, not pay, to work with legal experts before hiring executives. Ensuring that everything is in place beforehand, including the rates of compensation required if needed, can avoid long and arduous legal battles down the line for all involved.

Most businesses with an executive will try to follow the standard arbitration process to remove an executive. With that in mind, though, we recommend you look at hiring legal support before hiring any executive. This ensures that any potential legal headaches can be resolved ahead of time, making sure all parties can find an amicable agreement at the end.

Never take executive compensation off the table

Given the many situations that can unfold, it might seem plausible to remove access to compensation in some circumstances. Unless this is written in stone in the contract beforehand, it would be foolish to try and self-remove compensation. This is likely to be in violation of both the agreed agreement and general employment law.

If you wish to create no-compensation clauses for executives, it must be agreed upon and managed long before signing any contract. With that in mind, it is recommended that any business looking to hire an executive considers this beforehand.

Should you run into issues with any executive overcompensation, it makes sense to bring in a legal representative. They can review the contracts and the agreements and tell you how likely – or unlikely – you would be to win your dispute.

If possible, though, create contracts and company regulations that ensure compensation is understood and cleared up beforehand. This can ensure that any exits from your company can be handled in an amicable way that avoids reputational harm to your company, your staff, or your wider business.