Any information as to the general rule for bonus rate that should be paid to top executives of a company (Insurance/MGA specific if possible)?
Bonus to top executives?
Answers
1. As far as I know, there is NO "general rule" for C-Suite bonus rates. (especially for private companies).
2. For top executives, bonuses (computation, sources of numbers and rates, eligibility, etc) should have been set AT HIRING and made explicit in the contract. Compensation (and bonus) negotiation should include comparing the amounts and getting it in line with the overall company (C-Suite) salary structures. Depending on company needs, outliers (to the structure) may exist but the Board should be made aware of it and again, approved by them (See #4).
3. Total bonus amount should have been Board approved with the budget and (re)confirmed (if numbers are achieved) at yearly reporting.
4. Bonus Policy (including top execs) should have been approved by Board.
5. Anything else is just execution of 1-4.
MY (emphasis) guidelines (not necessarily in this order) are:
(1) Is it based on performance
(2) Is it fair and equitable. This is the tricky part and if #2 was done right, there would be no issues at end of year.
(3) Is it based on company performance
(4) Is it in line with rank and file bonuses (maybe "in line" is not the phrase I am looking for but I think you get the point)
Basically, at the end of the year, the decision on HOW TO DIVIDE THE PIE has already been made for you.
1
I've seen (across a number of industries) bonuses that have four parts.
a Max of 100% of salary based on:
1. Min. Bonus %
2. Bonus paid on a series of KPI's (including steps within a specific KPI)
3. A Board decision to pay cash or stock grants
No. 4 would be additional bonus dependent on the Board.
Thank you for the feedback. Company is privately owned by only one person (CEO/President). Just trying to have a starting point which at 100% of salary at a max should be good, depending at KPI etc.
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Human Capital