Big Red Car here.  Oh, just another great, sunny, warm day in  the ATX.  Got the assignment to drive down to Old San Antone yesterday unexpectedly.  The Boss had a last minute little crisis he had to deal with and since it was a nice sunny day, we went top down flying along Texas 281 through the edge of the Hill Country.

If you have never taken the “back way” to San Antonio and the Henley Cut, Old Sport, you are in for a treat.  On the way back [we had been at the Dominion Country Club on business out far northwest of town], we took the real back way up to Blanco and, my friend, that is some damn pretty country.  Right in the Hill Country and one of the most historic and scenic parts of Texas.  Old Comanche country.

It was something special and everybody has a bit of sun on their faces today.  Oh, yeah, had an excellent TexMex lunch at Barrio’s on Blanco Road — check it out.

So, Old Sport, speaking of something special let’s finish off the compensation design discussion of the C Level Agreement.  Remember we discussed the elements of compensation: salary, benefits, short term incentive compensation, long term incentive compensation and today — something special.

You can follow these chats at the C Level Agreement Series here or here are the individual posts pertaining to the issue of compensation.

 C Level Agreement — Salary

C Level Agreement — Benefits

C Level Agreement — Short Term Incentive Compensation

C Level Agreement — Long Term Incentive Compensation

Taken together, these posts provide an earthy framework to design an executive or senior level compensation package within the context of an Employment Agreement.

Something special

One of the opportunities in designing a C Level Agreement is for a CEO to obtain targeted and special compensation and for a Board to craft “golden handcuffs” with which to create value, inspire loyalty and foster longevity.

After all, the real objective of such an arrangement is to ensure that the company has the benefit of a good CEO’s talents for as long as possible.  This is the real duty that a Board provides to its shareholders.

CEOs have unique concerns and the market for a good CEO will address these concerns in order to attract and retain talent.  To not sprinkle a bit of “special sauce” on the C Level Employment Agreement is to miss an opportunity to create the value, loyalty and longevity that someone else might offer.

WTF, Big Red Car, what are you talking about here?

OK, Old Sport, here are some examples of things that would fall into the classification of “something special” and would deliver value to the CEO and give the Board a bit of peace of mind that the golden handcuffs are in place.

1.  Deferred compensation — an annual payment to a deferred compensation account that is owned by the company and directed by the CEO wherein the funds are expensed by the company and are not attributed as income to the CEO until actually delivered at some future date.  This has the obvious benefit of allowing the CEO to enjoy investment appreciation without short term tax liability.  The delivery of this deferred compensation account would also be part of any severance package.

We spoke of severance packages here — C Level Agreement — Severance Package.

Pro tip to CEOs:  Never, ever put company stock into this account.

2.  Does the CEO have a bunch of children?  If so, how about a college tuition fund funded to the tune of $5-10,000 in company stock, deferred compensation program?

3.  Does the CEO have his own airplane and want to use it for business?  How about a prorata reimbursement of business operating expenses v personal use?

The Boss used to have his own plane and it made him incredibly more efficient to be able to spend the whole day somewhere and then get home that night.  Boards are cautioned to get comfortable with the risk implications of such a policy.

4.  Networking of any kind is business and the CEO might appreciate an annual Christmas Party fund to be used to develop his network for the benefit of the business.  His wife will love his one.

5.  Speaking of wives, let the wife tag along on a few business trips particularly if they are to places where the CEO and wifey can tack on a few additional days to get the leverage of the travel expense.  Going to Charleston?  Tack on a few more days and bring the wife along.  When wife is unhappy, nobody is happy.

6.  A good CEO may qualify for YPO (Young Presidents Organization) or some other CEO peer to peer organization.  These are powerful drivers of CEO performance when done well.  Fund these memberships.  They can get expensive.

7.  Companies are well served when the CEO maintains a healthy of professional development — conferences and reading of professional books and periodicals are the two that come to mind quickly.  Fund these for the CEO as “something special”.

As you can see, CEOs and Boards, this is something in which a bit of creativity can create a bespoke compensation plan design that will serve the multiple objectives of value, loyalty, longevity and hand craftsmanship.

But, hey, what the Hell do I really know anyway?  I’m just a Big Red Car