Accounting based incentive

A type of compensation that is given to certain high ranking executives of companies that is determined by their direct contributions in helping the company meet specific levels of earnings and stock share equity return.

A method for compensating corporate executives based on whether they help their companies reach certain performance levels in areas such as earnings per share and return on equity. These plans are widely used and can be divided into two types: those that reward performing executives with cash and those that reward performing executives with stock. It is common for incentive pay to make up a significant portion of an executive’s compensation in firms of all sizes. Executives are also compensated with a base salary and benefits.

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