The following sections describe the basic elements of a typical executive compensation program. Constituencies such as customers, shareholders, and analysts are all stakeholders with whom one must maintain favorable relations.
Loyal customers are essential to long-term success.
Executives must be encouraged to do those things that will maintain and enhance customer loyalty. The recent emphasis on shareholder value creation is direct testimony to the importance of that linkage. Institutional shareholders, representing large blocks of shares, have become very active in assessing and influencing the appropriateness of executive compensation arrangements. A favorable or unfavorable commentary by prominent analysts can send stock prices soaring or tumbling. Compensation experts owe it to their company to understand what industry analysts seek and how this translates into overall strategy formulation and, more specifically, into appropriate executive compensation design.