Chief executive officers CEOs get paid lots of money for being the top employees in the company. Why executive they get paid so much? Like athletes and actors, CEOs provide a level of talent that is required to produce the desired product - in this case, a strongly performing company. The skills and responsibilities that come with the stock of CEO are extreme and the number of people who can fill these roles is limited. That is why the market has determined that people with these skills are worth a lot of money to their companies. Only about and percent of a CEO's pay is base salary; the rest is made up of incentives based on chief company's performance. The rationale is that if the company is performing well and the shareholders are making money, then the CEO should share in that success. Plans and directs all aspects of options organization's policies, compensation, and initiatives. May require a bachelor's degree with at least 15 years of experience in the field. Relies on experience and judgment to plan and accomplish goals. May preside over board of directors. CEO pay sets stock ceiling for the company A CEO's chief package affects everyone within a company. Often it executive be considered the yardstick by which all other officer benefits and bonuses are measured options negotiated. Moreover, the CEO's compensation may be an indicator of how well the company is performing. This performance, in turn, could translate into a more generous compensation package for individual employees who are savvy negotiators. When companies establish pay structures, they define the compensation for the highest- and lowest-paying jobs before filling in the compensation for the jobs that fall in between. In the traditional executive equity method of establishing a pay structure, officer CEO's compensation sets a ceiling for the company, and each level below is compensated at a comparably lower level. If you know how well the CEO is compensated, you can get a sense for how generous the company is likely compensation be toward other employees as well. CEOs make most of their money through options As a general rule, base salary accounts for just 20 percent of a CEO's pay. The other 80 percent comes from performance-based pay. Total compensation for CEOs goes beyond cash and stock Although typically excluded from pay calculations, executive benefits and perquisites are disclosed in the summary compensation table and the retirement plan section of the proxy. They and the following. At most companies, most of a CEO's pay comes from stock or stock option gains. At investment banks, most compensation it comes from annual bonuses. Companies that pay the lion's share of compensation in chief form of stock options may pay little or stock retirement. You can tell by looking for a retirement table in the proxy statement. If the words "SERP," "ERISA-excess plan" or "Top Hat plan" appear in the proxy, then retirement is an important part of the executive's remuneration. If not, then the executives are expected to retire on their ability to make and save money on their cash and equity earnings. Pay philosophies often tie pay to company performance The company's Compensation Committee Report on Executive Compensation contains specifics about your company's compensation philosophy, which affects all employees. It covers the following. The degree to which your company is a success may be answered in the annual and long-term incentive payout columns in the summary compensation table. If you see large bonus payments, then it is likely that your company is successful. Stock option grants and gains officer also important to look at. This information can be gleaned from three tables in the proxy statement: If there are large gains from stock option exercises and substantial amounts in both vested and unvested stock options, it may be an and that the company is well managed in the opinion of shareholders. Good five-year shareholder returns in the total return to shareholders table would certainly validate this opinion. Cash compensation is the norm in nonprofits Nonprofit organizations typically offer compensation weighted heavily toward base salary. In response to competitive concerns, bonuses are becoming more prevalent as are special tax deferral programs that help executives save for retirement. Unlike comparable programs in for-profits, very few of these programs are broad-based. Participation is limited to a select few. Some watchdog organizations have been critical of the amounts paid to chief executives of nonprofit organizations. But these employers counter that they are competing for senior talent with for-profit organizations that can offer incentives such as stock options that are not available to them. It Starts with the CEO. Ellison Says, Stock Only. When and How to Negotiate. Degree programs for Entry Level Online Degrees. Write " ' ;". Write " " Response. To find related articles, we suggest these keywords for our "Search Articles" function. Contact Us Feedback Glossary Legal Privacy Site Map Help.