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Employment law pertains to a variety of areas, including executive compensation. Corporations are subject to numerous laws and regulations in regards to packages given to top executives. With years of experience in Illinois courts, the Law Office of Mitchell A. Kline has the knowledge to assist corporations with compensation decisions and reporting requirements.

What is Executive Compensation?

Executive compensation does not only relate to salary. These compensation packages often include:

  • Cash compensation – This refers to the cash compensation that an executive receives as an annual salary.
  • Equity-based compensation, such as stock options – This type of compensation increases or decreases in relation to the financial well being of the company.
  • Deferred compensation arrangements – These arrangements involve compensation that is given at a later date. When choosing this type of compensation package, companies should be aware of the potential tax consequences involved.
  • Retirement benefits – This is compensation given to executives after their retirement from the company. An important consideration for this type of compensation is the potential inclusion of a golden parachute. Golden parachute arrangements include significant benefits for top executives in the event of corporate takeover. Sometimes, these arrangements can result in substantial compensation for executives who did not adequately perform in their duties.

There are numerous issues for consideration in regards to executive compensation packages. An experienced employment law attorney can help your business with tax compliance, the U.S. Securities and Exchange Commission (SEC) disclosure regulation and Department of Labor regulations.

SEC Regulations

The SEC maintains various disclosure regulations in regards to executive compensation. When registering with the agency, corporations are required to detail the amount and type of compensation paid to their company executives. In addition, the provided information must describe the process used to determine the compensation package, as well as the relation between compensation and company performance. The SEC also requires corporations to notify their shareholders of the executive compensation package for an advisory vote. These regulations are in place to protect shareholders and investors from unjustifiable executive compensation amounts. Failure to follow these guidelines can result in fines and, in some cases, civil liability.

Shareholder Considerations

Executive compensation is extremely important to business shareholders for two basic reasons. First, the amount of compensation awarded to company executives takes away from the profits of the business. For this reason, shareholders sometimes want to greatly limit the value of executive compensation packages. Secondly, shareholders worry that overly-compensated executives will maintain little motivation to truly work in the best interest of the company, which can result in fewer profits for the shareholders. An experienced employment law attorney can help your company determine what types of executive compensation structures can address these shareholder concerns.

Determining executive compensation entails much more than picking a salary. Corporations must follow various regulations and laws and an experienced Chicago employment law attorney can assist with your compliance. Our law offices have been handling employment law cases for more than 20 years. The Law Office of Mitchell A. Kline can assist you in creating an appropriate executive compensation package or represent you when compliance issues arise. Contact the Law Office of Mitchell A. Kline today for your free and confidential consultation.

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