General Principles of Remuneration of executive directors

The remuneration package of an executive director depends on the policies of an organisation but of course designed and implemented by the remuneration committee. New companies that would want to grow rapidly might not offer heavy packages because equity needs to finance the growth.

On the other hand the remuneration package of a director should be enough to attract quality new directors with knowledge and experience of the business at the same time retaining the current ones. When the remuneration committee are preparing the remuneration packages they also consider what other companies are paying directors to remain competitive.

I think that this can be expanded on. A Remuneration committee must ensure that it is developing packages for the directors that are in the best interests of its shareholders. So whilst it must be in line with past experience, retention needs, market rates and so on it must also provide an incentive. Performance based pay is a key principle that a remuneration committee must look at. Should they offer long or short term bonuses/shares. Other general principles would include pension and ad hoc benefits such as a company car i.e. is an expensive company car in the best interests of the shareholders.