A Primer In Executive Compensation In Not-For-Profits

Written by Paul R. Dorf, Ph. D., APD

Upper Saddle River, N.J. – July 19, 2005 - A tremendous amount has been written about Executive Compensation, and lately, most of this information has been extremely unflattering. Much ofrepparttar criticism has resulted fromrepparttar 151014 gross excesses, misinterpretations of regulations, andrepparttar 151015 rash of criminal cases brought againstrepparttar 151016 top management of a number of large firms, such as WorldCom, Tyco, Enron, and a host of others. Virtually every day another egregious example of corporate greed has come to light. The effect has been a huge increase in media attention, which in turn has acted asrepparttar 151017 stimulus for new government regulations aimed at curbing these abuses. While most ofrepparttar 151018 regulations are aimed at publicly traded companies, there has been some spill-over intorepparttar 151019 Not-For-Profit (NFP) sector. NFPs have their own set of federal and state regulations limiting executive compensation;repparttar 151020 most draconian of these regulations being IRC §4958, or what many refer to as “Intermediate Sanctions”.

It is interesting to note that, forrepparttar 151021 most part,repparttar 151022 regulations covering for-profit, publicly traded companies provide few, if any penalties, and certainly none are spelled out for board members involved inrepparttar 151023 approval of compensation deemed to be excessive. Since in many situations,repparttar 151024 only penalty is that companies cannot deductrepparttar 151025 amount of an excessive compensation payment,repparttar 151026 brunt ofrepparttar 151027 penalty falls ontorepparttar 151028 shareholders. Conversely,repparttar 151029 NFP regulation calls for a 25% excess tax plus a disgorgement ofrepparttar 151030 excess amount. If this does not occur,repparttar 151031 fine jumps to 200%. In addition,repparttar 151032 board members ofrepparttar 151033 NFP, most of who are not paid for their board service, but are merely acting in an altruistic manner, are subject to individual fines ofrepparttar 151034 lesser of 10% ofrepparttar 151035 excess, or $10,000.

What arerepparttar 151036 components ofrepparttar 151037 NFP compensation package? There are traditionally six (6) elements that to one degree or another compriserepparttar 151038 Total Compensation Package of executives, whether or not they are part of a For Profit or NFP. These are base salary, annual bonuses or incentives, long-term incentives which could include stock options, restricted stock, phantom stock, and a large group of equity and cash based programs, typical fringe benefits, supplemental benefits and perquisites, and lastly various written documents or agreements that spell outrepparttar 151039 employment and severance provisions. Inrepparttar 151040 case of NFPs, most of these elements are included but often with scaled-down arrangements. One area that is definitely changing isrepparttar 151041 increased acceptance and use of annual bonuses and incentives. Rather than paying cash compensation inrepparttar 151042 form of salary only, many NFPs are beginning to introduce variable pay. This not only better alignsrepparttar 151043 cash compensation with achievement of predefined results; it also allowsrepparttar 151044 Board to in effect “reduce” pay whenrepparttar 151045 NFP’s situation changes, performance objectives are not met, or when there are cash flow issues. It also allowsrepparttar 151046 NFP to provide a more competitive compensation package that better reflectsrepparttar 151047 realities ofrepparttar 151048 market place. The one compensation element, which heretofore has been virtually missing fromrepparttar 151049 Total Compensation Package, isrepparttar 151050 use of long-term incentives, which typically exists in For Profits inrepparttar 151051 form of equity. This is one ofrepparttar 151052 major disparities between For Profits and NFPs, and it is one ofrepparttar 151053 areas which needs to be addressed in order to begin to “levelrepparttar 151054 playing field” betweenrepparttar 151055 two business groups.

Although it is generally understood that individuals in comparable positions withinrepparttar 151056 For Profit and NFP industries will not necessarily be paid at exactlyrepparttar 151057 same level, there is still a misguided concept held by some individuals, that working at an NFP is rewarding enough, so that their overall compensation should be markedly lower. While altruism is clearly evident, it doesn’t payrepparttar 151058 rent. Recognizingrepparttar 151059 ability of an NFP to pay reasonable levels of compensation, without harmingrepparttar 151060 organization’s ability to carry out its mission, should be a main consideration in determining what compensation elements compriserepparttar 151061 package, and in what amounts.

Is it appropriate to provide short-term and long-term incentives? Short-term incentives are generally associated withrepparttar 151062 achievement of annual financial and/or operational goals. These goals are typically set atrepparttar 151063 beginning of a fiscal year, and their achievement is part of a tactical plan to advancerepparttar 151064 NFP’s mission. To ensure that these awards do not become an “entitlement”,repparttar 151065 Board must set realistic but stretch objectives, and determinerepparttar 151066 actual level of accomplishment against those performance measures when granting awards. Paying out bonuses whenrepparttar 151067 performance is not achieved, orrepparttar 151068 measures are a “slam dunk”, sendsrepparttar 151069 wrong message and defeatsrepparttar 151070 intent ofrepparttar 151071 entire incentive system.

Entrepreneurial Business Plan The Down And Dirty Way

Written by Suzan Fiskin

Doesrepparttar idea of running your own business sound exciting? Do you have a business up and running and want to take it torepparttar 150976 next level?

After coaching hundreds of entrepreneurs at various stages of their evolution, I’ve found thatrepparttar 150977 answers to these 5 questions can make or break any endeavor. Of course there are lots of other areas that must be addressed, however these will get you moving inrepparttar 150978 right direction quickly.

Shhh, don’t tell anyone. Once you have these answers, you’ve created a basic and relatively painless (dare I say it?) Down and Dirty Business Plan™.

Are you ready? Go for it!

1. What problem do you solve?

You MUST begin here. If you don’t know what problem you solve, you don’t have a snowball’s chance. What real need do your potential customers/clients have that isn’t be fully addressed yet? Where’s their pain?

2. For whom do you solve it? or What is your niche?

In today’s economy,repparttar 150979 best (many sayrepparttar 150980 only) way to market your goods or services is to be very specific about targeting your potential customers. You can locate them, they can find you, and others can refer to you. This is scary for most entrepreneurs because it means saying “No” to some people. Let it go. It works!

3. Who’s your competition?

It’s time to become a stealth researcher. Who else is doing anything like what you’re doing? What’s their niche? How do they market? What do they charge? How long have they been in business? How are they unique?

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