The paper “ Compensation Models, Salary in Addition to the Percentage Production, Importance of Compensation” is a worthy example of the essay on finance & accounting. The topic of compensation is usually complicated, emotionally charged, and also misunderstood in corporate governance. The effective implementation of compensation models catalyzes individual and professional growth and inspires the enhancement of motivation, performance, and morale in the workplace. The top executives in business corporations contribute considerably to the success of the organizations that they work for. This is achieved through the provision of basic salary, bonuses, options, shares, among other benefits.
There has been an increment in the compensation of executives in the recent past that surpassed the average wage level of workers. This is an issue of importance in the corporate governance in the company and the determination of its implementation is the responsibility of the board of directors of the company. Typically, the majority of the companies’ CEO in addition to the rest of the top executives receives some short-term incentives as well as bonuses in addition to their basic salary. The combination of this compensation is the “ Total Cash Compensation” (TCC) (Chingos 36). The short term incentives are associated with performance criteria and are driven by a certain formula all based on the role that the executive play.
For example, the basis of the bonuses of the Sales Director that are related to performance is the growth turnover of incremental revenue while that of the CEO is determined by the incremental profitability as well as the revenue growth. On the contrary, bonuses are not driven by a formula but are discretionary and based on after-the-fact analysis (Chingos 39-42). Another form of compensation for the executives is a combination of cash with the company shares which in most cases are guided by the vesting restriction being a long-term form of incentives.
The qualification of these incentives is the achievement of a measurable period of not less than one year, 3-5 years being the most common. The implication of the vesting term is the time period required to be achieved by the recipient to acquire the rights of share transfer alongside realizing their value.
Work CitedChingos, Peter T. Paying performance: a guide for the compensation management 2nd Edition. NY: John Wiley and Sons, 2002.