How should corporations combat erosion of executive benefits?
Ask CEOs what their most valuable asset is, and the majority will answer, my people-the team of management and creative experts that drive innovation and profitability. Ask any of those people what their biggest financial concern is, and the majority will answer, my family's long term financial security.
Both responses lead directly to the potential of executive benefits plans to . . .
- Position companies to more effectively compete for executive and technical talent and align their commitment to long term corporate goals.
- Position highly compensated employees to maximize tax-deferred wealth accumulation strategies and align their future with the corporate mission.
While nearly every large public company has installed such plans over the years, most privately held businesses compensate key people with only salary, bonus, and perks. The problem in the large corporations is that layers of executive benefits plans have left them with an under-valued and impossible-to-administrate mess. The problem for private companies-compensation drains critical cash flow and forces key people to be less concerned about the corporate bottom line than the personal one.
Questions CEOs and CFOs should ask to maximize their management strength.
1. If you do not have an executive benefits plan, what is your competitive position within your hiring market? Within your industry? What has been your turnover record for highly compensated employees? What is the real cost of that loss?
2. What is the company philosophy and track record for rewarding loyalty, longevity, and productivity? How do you align your executives' personal financial goals to corporate financial goals?
3. How do the limitations of qualified pension plans affect the members of your management team? What opportunities to increase their tax-deferred investments would they use if you offered?
4. If you have an executive benefits plan, how well-utilized and well-appreciated is it? Is it effectively securitized? Is it effectively financed? Is it in DOL compliance?
5. What kind of flexibility was built into the plan? Did that create tracking and reporting headaches? Has it been administered to your company's standards?
The decision process begins with the right questions.
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