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Executive Compensation in ESOP Companies

(Print Version)

4th Edition

by David Ackerman, Neil M. Brozen, Bruce Grussing, Matt Keene, Loren Rodgers, Corey Rosen, Stephen D. Smith, Christopher Staloch, and Nancy Wiefek

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Executive compensation in ESOP companies has become a much more complex issue in recent years. To begin with, S corporation anti-abuse rules, the standards established by Sarbanes-Oxley, and the Section 409A deferred compensation rules can pose problems. The good news is that those problems can be successfully avoided, as this book explains. But there is much more to executive compensation than complying with the rules or maximizing tax benefits. Under ERISA, the ESOP trustee must be an involved shareholder and ensure company assets are not wasted on excessive or unjustified executive compensation. However, the trustee also wants to ensure that executive compensation plans are adequate to attract and retain qualified, motivated key employees. Boards of directors share the same concerns, of course, and have a fiduciary responsibility to shareholders to strike the right balance. So in addition to exploring the rules for executive compensation, the chapters in this book help ESOP companies find the best strategies for executive compensation. Finally, this book includes a report on the NCEO's survey of executive compensation in ESOP companies. The data provide a detailed picture of the forms and size of compensation in ESOP companies.

The fourth edition replaces the chapter on the 2012 NCEO Executive Compensation Survey with one on the NCEO's latest survey (2014), including the full survey instrument itself as an appendix.

To get a custom report based on our latest ESOP company executive compensation data, or even to acquire the entire executive compensation database, see our ESOP Executive Compensation Survey Results.

Publication Details

Format: Perfect-bound book, 91 pages
Dimensions: 8.5 x 11 inches
Edition: 4th (May 2015)
Status: In stock


1. Overview of Executive Compensation for ESOP Companies
2. Legal and Regulatory Issues
3. Fiduciary Issues for Trustees Regarding Corporate Governance and Executive Compensation
4. Sharing Equity with Key Employees in ESOP Companies
5. Valuation Issues
6. Special Issues for S Corporations
7. Using Compensation Studies Wisely
8. The 2014 NCEO Executive Compensation Survey


From Chapter 3, "Fiduciary Issues for Trustees Regarding Corporate Governance and Executive Compensation"

If one or more officers are being paid excessive amounts for post-sale consulting agreements, this will reduce the amount the ESOP will get on the sale. We know of one case where the proposed consulting agreement for the majority individual shareholder was equal to one-third of the value of the company (determined before the consideration of this agreement). The consulting agreement was for five years (with a substantial death benefit) even though it was discovered that the shareholder had terminal cancer and was not expected to live more than six months after the scheduled closing. The trustees objected, and the sale was not completed. The company was sold a few years later on much better terms.

From Chapter 8, "The 2014 NCEO Executive Compensation Survey"

Table 8-4 shows the amounts for each of the types of pay across the seven positions, broken down by percentiles. This also shows the number of companies who reported an amount for each of the types and positions. For instance, among the 373 companies who reported the base salary for their CEO, 194 of them or 52% also include qualified retirement plan payments in his or her total pay package. This is aside from the allocations to ESOP accounts that presumably all (or almost all) get. Comparatively, stock-based compensation looks to be lesser-used: 107 respondents, or 29%, include it in their CEOs' packages.