Structuring executive compensation for C-level executives (CEO, CFO, CTO) is a strategically important issue directly linked to a company's success. Unlike standard salaries, top management remuneration often consists of multiple components: fixed salary, performance-based bonuses (KPIs), Long-Term Incentive Plans (LTIP), insurance, and other benefits. Proper structuring of this package is essential to align the manager's interests with those of shareholders and the company's long-term goals. Furthermore, complex compensation schemes require careful tax and legal analysis to avoid excessive tax burdens and corporate conflicts. Specialists on Legal.ge help you create transparent, fair, and legally compliant compensation structures.
What Does Executive Compensation Structuring Service Cover?
Our lawyers and HR consultants offer a comprehensive approach:
- Compensation Package Design: Determining the optimal balance of salary, bonuses, commissions, and other benefits considering market standards.
- KPI and Bonus Systems: Developing Key Performance Indicators (KPIs) and legally outlining them in the contract to make bonus distribution clear and measurable.
- Golden Parachutes: Defining compensation terms in case of executive dismissal or Change of Control.
- Tax Optimization: Analyzing the taxation of various types of compensation (e.g., housing allowance, car, insurance) and selecting the most efficient structure.
- Clawback Provisions: Implementing mechanisms that allow the company to reclaim issued bonuses if it turns out the manager falsified financial data or caused harm to the company.
Real-World Scenarios When You Need This Service
Compensation structuring is necessary when:
- Hiring a New CEO: Negotiating remuneration with a high-level professional is often complex. A professionally drafted offer helps attract talent.
- Startup Growth: As a startup moves to the growth stage, it is necessary to systematize the remuneration of founders and hired managers.
- International Company Branch: When relocating foreign managers to Georgia (Expat packages), local tax legislation must be considered.
- Conflict Prevention: Vague bonus systems often lead to disputes between directors and founders. Clear criteria reduce risks.
Georgian Legal Framework and Regulations
Compensation issues are regulated by the Law on Entrepreneurs (which defines the rules for approving director remuneration) and the Tax Code of Georgia. It is important to distinguish between salary under an employment contract and fees received under a service agreement. The Tax Code treats monetary and non-monetary benefits (Benefit in Kind) differently. Also, the Law on Entrepreneurs includes conflict of interest rules — a director should not determine their own remuneration; this is the prerogative of the partners or the supervisory board.
Service Process
Collaboration with Legal.ge specialists involves:
- Analysis: Researching the company's financial capabilities and the market.
- Modeling: Developing several compensation models (e.g., high fixed vs. high bonus).
- Legal Drafting: Preparing contracts and policy documents.
- Approval: Going through corporate procedures (meeting minutes) to legitimize the compensation.
Why Choose Legal.ge?
Executive compensation involves not just numbers but a mix of law, taxation, and HR psychology. Experts on Legal.ge will help you create a package that is attractive to top managers, safe for the company, and effective for business growth. We ensure your agreements are solid and transparent.
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