You are an HR specialist for a national beverage distributin

You are an HR specialist for a national beverage distributing company. The company has been losing top executives to rival companies. Exit interviews have discovered the primary reason executives are leaving is executive compensation packages offered by other companies. The company has appointed you to lead a compensation committee, tasked with revamping its executive compensation program.

For your post, describe several elements of a new executive compensation program, including descriptions and examples of base salaries, benefits, perks, short and long-term performance-based incentives, and exit packages. Analyze the impact of the new compensation program to the retention of executives, long-term growth and success of the organization.

Solution

Executive compensation is very important consideration for the organization to attract and retain the top executives. It brings stability in the operation and company can build competitive advantage based upon the human resources.
An executive compensation should be competitive , at par or better than the offers made by the peer organizations to retain the executives with focus upon its different components such as base pay, allowances and perks, fringe benefits and short and long term incentives so that executives take the existing job as the best possible opportunity in the job market.
As a part of executive compensation, the base pay refers to the payment made to the executive that is based upon the position and it is not inclusive of any other benefits and allowances. It is fixed for the position. It should be revised as per the benchmarking study and it should be at par with the nest of the industry. The allowances are given as benefits to the employees to cover their housing, rent, transportation and mobile expenses. These allowances are based upon the base pay. So, higher base pay, leads to the higher allowances. The next component is the fringe benefits such as leaves, tour allowances, insurance, flexi-timings of work and other similar benefits that make the job to be very attractive. It shows the job to be employee friendly and builds an employer branding in the market.
The short term incentives are based upon the performance and it can include bonuses and sales based commission to the executives and employees. It further increases the compensation. The nature of such incentives can be periodical so that employees can be retained and motivated for the time. The long term incentives are stock option plans and making them shareholders. Besides, offering them a percentage of the profit, earned by the company will also help to retain as well as attract new employees. It also prevents agency conflict.
The exit package refers to the package offered to the outgoing executives if they leave the organization or employer decides to part ways with the executive.
Each component of package as mentioned above, should be carefully examined and set at par with the best in the industry. It will help the organization to resolve the problems related to the employee turnover.