Highly skilled executives with a talent for effective leadership are in constant demand in the business world. The competition for these individuals can be fierce. Very few companies can achieve or sustain successful results for long without the right management team.

In order to attract and retain the best executives, companies must offer compensation packages that go beyond base salary. Top executives have come to expect compensation packages that include many types of cash and non-cash compensation, some of which are designed to achieve favorable tax treatment for the executive and the employer.

Public companies are required to disclose many of the details of the pay packages that go to their top executives. This readily accessible source of information makes it easy for executives to learn about trends in compensation arrangements and make comparisons to their own situation.

Executive compensation usually combines a fixed base pay with a bonus that is paid only if certain conditions are met. Bonus plans come in a variety of forms. Normally, goals are established at the beginning of the year, and a bonus is paid at the end of the year if the executive meets the goals.

Some bonus plans are tied to the achievement by the company of certain targeted results, such as minimum levels of revenue or profit or a successful launch of a new product or service. Some bonus plans set performance goals that are specific to the individual executive.

Not all bonus plans are tied to the profitability of a company. Executives may be eligible for discretionary bonuses that permit a reward for a strong personal performance in the face of a downturn in the business or in the economy.

Fringe benefits are usually an important part of an executive’s compensation package. In addition to the usual perks, executives normally qualify for other benefit.

The value of some of these extra benefits can be quite significant. The use of a company car or a country club membership can be worth tens of thousands of dollars to an executive.

Most executive packages include some form of equity participation in the company. This might be a stock option plan or a profit sharing arrangement. It might involve periodic grants of stock as a bonus for achieving certain goals or remaining with the company for a period of years.

One of the goals of these stock plans is to reward top managers for good results. Another goal is to reward them for staying with the company.

Many stock plans include the concept of vesting. These plans provide that an executive’s right to receive the benefits under the stock plan vest over time. The benefits may be subject to forfeiture if the executive quits before the targeted vesting date. They may also be lost if the executive is fired for cause.

Executive compensation packages often contain protections against changes in ownership of the company. If an executive is required to remain with an employer for five years in order to fully vest under a stock plan, that requirement may be waived if the company is sold to new owners before the end of the five-year period.

These change in control provisions are attractive to executives who may fear that the business will change under new ownership. The executive’s authority may be limited, or the new owners may have a different vision for the company. This could impact the executive’s chances to earn a bonus or a pay increase in future years.

A change in control or a termination without cause may also trigger a sizeable severance payment to an executive. Severance arrangements are common in most executive compensation packages. In addition to cash payments, severance arrangements may also include the right to continued coverage under medical insurance or other benefit plans for some period of time.

Executive compensation packages often provide for compensation and benefits that continue if the executive becomes permanently disabled. They may also provide for a continuation of pay and benefits to the executive’s heirs in the event of death. Employers can fund these types of benefits with disability or life insurance.

One of the most important benefits that many executives have is a guaranteed term of employment. In contrast, most employees can be fired at any time for any reason. Many top managers have employment agreements that create the right to remain employed for a specific time period. Employers can’t shorten the employment term unless the executive breaches the agreement or does something that would justify termination for cause.

Barbara Sager is an attorney with the law firm of Coolidge, Wall, Womsley & Lombard. This information is general in nature and should not be construed as a legal opinion on specific facts or circumstances.