Executive pay (also executive compensation), is financial compensation received by an officer of a firm.

It is typically a mixture of salary, bonuses, shares of and/or call options on the company stock, benefits, and perquisites, ideally configured to take into account government regulations, tax law, the desires of the organization and the executive, and rewards for performance.

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Over the past three decades, executive pay has risen dramatically relative to that of an average worker's wage in the United States,

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and to a lesser extent in some 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. governance, and is often determined by a company's board of directors.

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Executive pay is an important part of corporate

There are six basic tools of compensation or remuneration.

salary short term incentives (STIs), sometimes known as bonuses long-term incentive plans (LTIP) employee benefits paid expenses (perquisites) insurance

In a modern corporation, the CEO and other top executives are often paid salary plus short-term incentives or bonuses. This combination is referred to as Total Cash Compensation (TCC). Short-term incentives usually are formula-driven and have some performance criteria attached depending on the role of the executive. For example, the Sales Director's performance related bonus may be based on incremental revenue growth turnover; a CEO's could be based on incremental profitability and revenue growth. Bonuses are after-the-fact (not formula driven) and often discretionary. Executives may also be compensated with a mixture of cash and shares of the company which are almost always subject tovesting restrictions (a long-term incentive). To be considered a long-term incentive the measurement period must be in excess of one year (35 years is common). The vesting term refers to the period of time before the recipient has the right to transfer shares and realize value. Vesting can be based on time, performance or both. For example a CEO might get 1 million in cash, and 1 million in company shares (and share buy options used). Vesting can occur in two ways: "cliff vesting" (vesting occurring on one date), and "graded vesting" (which occurs over a period of time) and which maybe "uniform" (e.g., 20% of the options vest each year for 5 years) or "non-uniform" (e.g., 20%, 30% and 50% of the options vest each year for the next three years). Other components of an executive compensation package may include such perks as generous retirement plans, health insurance, achauffeured limousine, an executive jet[1], interest free loans for the purchase of housing, etc.

http://en.wikipedia.org/wiki/Executive_pay