Executive Compensation definition

Remuneration packages paid to senior leaders in a business, most commonly the CEO. Executive compensation packages differ from employee remuneration both in scale and the benefits offered. Stock options form an integral part of most executive compensation packages, as well as a large basic salary, although many firms will offer a low basic salary and more favourable stock options to reduce the tax burden.

Executive compensation can be a controversial topic, both internally and externally, especially considering that in recent years it has grown significantly compared to the average worker's compensation. When workers feel their leaders' compensation is far beyond what they actually deserve, employee engagement, loyalty and productivity can suffer.

Externally, if companies are perceived to be failing, damaging to the environment or unfair to employees, the amount of money paid to executives often forms a significant part of the media attention. One of the most prominent examples is following the financial downturn that began in 2008 – executives at many of the world's largest banks continued to be paid significant salaries despite them having received bailout funds from the public purse. In response, some CEOs – notably SPLABIM – publicly gave up their executive compensation.