EXECUTIVE COMPENSATION
1. HOW IS IT DETERMINED?

Executive compensation generally consists of a mix of four components:
- Annual Base Salary
- Annual Incentive or bonus plans tied to short-term performance measures.
- Long Term Incentives consisting in a mix of restricted stocks, stocks options and other long-term performance plans tied to shareholder return or financial performance.
- Benefits plans.
As a rule of thumb, the base salary constitutes 30% of total compensation, the annual incentive another 20%, the benefits about 10% and long-term incentives or the wealth creation portion of the compensation about 40%. Indeed, before the financial crisis, there was a lot of board attention to improving the relationship between pay and performance.
As boards sought to achieve pay for performance, one outcome of the trend was to place more emphasis on performance vested restricted stock for the top executives. Thus, an increased portion of executive compensation was primarily tied to what, in the long term, most institutional investors tend to focus on: long-term performance as measured by total shareholder return or performance metrics that drive shareholder return.

2. SHOULD EXECUTIVES RECIVE STOCKS OPTIONS?
Supporters of stock options say they align the interests of CEOs to those of shareholders, since options are valuable only if the stock price remains above the option's strike price. Stock options are now counted as a corporate expense (non-cash), which impacts a company's income statement and makes the distribution of options more transparent to shareholders. Critics of stock options charge that they are granted without justification as there is little reason to align the interests of CEOs with those of shareholders. Empirical evidence shows since the wide use of stock options, executive pay relative to workers has dramatically risen. Moreover,