Reference
Executive Compensation Glossary
33 essential terms for understanding CEO pay, SEC proxy filings, shareholder governance, and equity compensation. Each entry explains the concept in depth with regulatory context and practical significance.
Compensation
Golden Parachute
A lucrative severance package triggered when an executive is terminated following a change of control, such as a merger or acquisition.
Executive Perquisites (Perks)
Non-cash benefits provided to executives, including personal use of corporate aircraft, security, financial planning, and club memberships.
Total Compensation (Summary Compensation Table)
The sum of all compensation elements reported in the SEC's Summary Compensation Table: salary, bonus, stock awards, option awards, non-equity incentive, pension changes, and other compensation.
Non-Equity Incentive Compensation
Cash bonus payments earned by meeting pre-established performance targets, typically based on annual financial metrics like revenue, earnings, or operating income.
Change of Control
A corporate event — such as a merger, acquisition, or hostile takeover — that triggers special provisions in executive employment and equity agreements.
Nonqualified Deferred Compensation
Executive retirement savings plans that allow executives to defer compensation beyond the limits of tax-qualified 401(k) plans.
Base Salary
The fixed annual cash payment to an executive, typically the smallest component of total CEO compensation at large public companies.
Severance Agreement
A contractual arrangement specifying the compensation and benefits an executive receives upon involuntary termination, including cash payments, equity acceleration, and benefit continuation.
Equity Awards
Stock Options
The right to purchase company shares at a fixed "strike price" in the future, valuable only if the stock price rises above that price.
Restricted Stock Units (RSUs)
Shares of company stock granted to executives that vest over time, typically three to four years.
Performance Share Units (PSUs)
Equity awards that vest only if specified performance targets — such as TSR, EPS, or revenue growth — are achieved.
Equity Compensation
Compensation paid in the form of company stock or stock-linked instruments, including RSUs, PSUs, stock options, and restricted stock.
Governance
Say-on-Pay Vote
A non-binding shareholder advisory vote on whether the company's executive compensation is appropriate.
Clawback Provision
A contractual clause allowing a company to recover previously paid compensation if certain conditions are triggered, such as a financial restatement.
Compensation Committee
The board committee of independent directors responsible for setting executive pay, hiring compensation consultants, and designing incentive programs.
Glass Lewis
One of the two major proxy advisory firms that issues voting recommendations to institutional shareholders on executive pay and governance matters.
Institutional Shareholder Services (ISS)
The largest proxy advisory firm, providing institutional investors with voting recommendations on executive pay, board composition, and governance proposals.
Independent Compensation Consultant
An external advisor retained by the compensation committee to provide market data, benchmarking, and advice on executive pay design.
Shareholder Activism on Pay
Organized efforts by institutional investors to challenge or change a company's executive compensation practices through proxy voting, engagement, or public campaigns.
SEC Filings
Proxy Statement (DEF 14A)
The annual SEC filing that discloses executive compensation, board nominees, and matters requiring a shareholder vote.
SEC Filings
Documents public companies are required to file with the Securities and Exchange Commission, including annual reports, proxy statements, and insider trading reports.
DEF 14A
The formal SEC filing designation for a definitive proxy statement, the primary source of executive compensation data for public companies.
Compensation Discussion & Analysis (CD&A)
The narrative section of the proxy statement where the compensation committee explains its philosophy, decision-making process, and rationale for executive pay.
Summary Compensation Table (SCT)
The standardized SEC table in the proxy statement that reports total compensation for each named executive officer, broken down by component.
Named Executive Officers (NEOs)
The group of senior executives whose compensation must be individually disclosed in the proxy statement, typically the CEO, CFO, and three other highest-paid officers.
Metrics
CEO Pay Ratio
The ratio of the CEO's total compensation to the median employee's total compensation, required by the SEC since 2018.
Total Shareholder Return (TSR)
The total return to shareholders from stock price appreciation plus reinvested dividends over a specified period.
Pay vs. Performance Disclosure
An SEC-mandated table and graph in the proxy statement showing the relationship between executive compensation actually paid and company financial performance.
Peer Group Benchmarking
The practice of comparing a company's executive compensation against a selected group of similar companies to determine competitive pay levels.
Pay-for-Performance Alignment
The degree to which executive compensation levels correlate with company financial performance and shareholder returns.
Realizable Pay
An alternative compensation measure that values equity awards based on current stock price rather than grant-date fair value, showing what the executive could actually receive.
Regulation
Dodd-Frank Pay Provisions
Sections of the 2010 Dodd-Frank Act that mandate say-on-pay votes, CEO pay ratio disclosure, pay-versus-performance tables, and clawback policies.
Section 162(m) Deduction Limit
An IRS rule that limits the corporate tax deduction for executive compensation to $1 million per covered employee per year.
All Terms A-Z
Frequently Asked Questions
What is executive compensation?
Executive compensation is the total pay package for senior corporate officers, including base salary, stock awards, stock options, cash bonuses, pension benefits, and perquisites. For S&P 500 CEOs, the median total compensation exceeds $15 million per year, with equity awards typically representing 60-75% of the total.
Where can I find CEO pay data?
CEO compensation is publicly disclosed in the DEF 14A proxy statement filed annually with the SEC. These documents are available on SEC EDGAR (sec.gov/edgar). CEOPay extracts and analyzes this data for 200+ public companies.
What is a say-on-pay vote?
A say-on-pay vote is a non-binding shareholder advisory vote on executive compensation, mandated by the Dodd-Frank Act. Shareholders vote annually to approve or disapprove the pay packages disclosed in the proxy statement. While non-binding, low approval rates pressure boards to reform pay practices.