How to Handle Executive Compensation as an HR Pro

At public companies, executive compensation is one of the most scrutinized and consequential areas HR touches, but that doesn’t mean understanding, administering, and navigating the complexities of executive compensation at private companies isn’t just as complicated.

Yet most HR professionals inherit the responsibility without a clear roadmap.

Often HR doesn’t design the package or set the final numbers for executive compensation, but they do have to deal with the perception that they have influence while still owning their real responsibilities.

Consider the landscape:

• Among the largest public companies in the US, median CEO pay reached $29.4 million in 2025, up 23.2% year-over-year, with S&P 500 CEOs’ salaries sitting at a median of $1.2 million.
• The median base salary for CEOs at US private SMBs was $325,000 in 2024.
• 45% of salaried employees report feeling underpaid.

Executive compensation numbers land on HR’s desk in the form of compliance obligations, employee questions, and benefits administration whether HR sets them or not. Meanwhile, the context of employee sentiment and perception of executive pay matters to the culture of your workplace—another HR purview.

Administering executive pay packages you didn’t design, navigating a shifting regulatory environment, and maintaining internal credibility when employees ask about pay gaps all fall into HR’s lap. This guide gives you a clear map of what goes into executive compensation, what HR actually owns, and the compliance requirements you need to know.

What is executive compensation?

Executive compensation is designed to attract, retain, and align leadership with the long-term interests of the organization. It’s the total pay package given to an organization’s senior-most leaders and includes salary, bonuses, stock awards, and perks.

Executive comp doesn’t just translate to “bigger numbers the higher up the ladder.” The structure itself is fundamentally different from broad-based compensation. Executive comp is more variable, more long-term-oriented, and often individually negotiated within a governance framework.

Who counts as an executive?

“Executive” generally refers to the chief executive officer (CEO) and their direct reports—the chief financial officer (CFO), chief operations officer (COO), chief people officer (CPO), general counsel, and similar roles.

The legal and operational definitions of “executive” depend on your organization’s setup:

• Named executive officers (NEOs): Per SEC Regulation S-K Item 402, which outlines how public companies must report executive pay, NEOs include the principal executive officer (CEO), principal financial officer (CFO), and the three most highly compensated executive officers beyond those two. Function and compensation level determine NEO status, not title alone.
• Covered employees [IRS Section 162(m)]: At publicly held corporations, compensation paid to “covered employees” (the CEO, CFO, and three other highest-compensated officers) is subject to a $1 million annual business tax deduction limit, which is an important variable to recognize when compensation planning conversations occur.
• Private and nonprofit leaders: While the NEO framework doesn’t apply to private or tax-exempt organizations, defining the executive group is important for benefits design, market benchmarking, and, for nonprofits, Form 990 public disclosures.

For the purposes of this guide, an “executive” is any senior leader whose compensation involves governance oversight, long-term incentives distinct from other internal incentive programs, and compliance considerations beyond standard payroll.

The core components of an executive pay package

In contrast to employee pay, the structure of executive compensation is generally designed to account for executives’ decisions carrying a high level of organizational consequence. That means, in many cases, more of the total value is deferred or tied to multi-year performance and strategic risk.

Most executive packages are built around five core components: base salary, short-term incentives, long-term incentives, executive benefits, and perquisites (perks).

Executive compensation structures across organizations

Base salary

Base salary is the fixed cash foundation of a pay package and serves as the anchor for calculating short-term incentive targets, which are often expressed as a percentage of base.

Among CEOs at the largest US public companies, base salaries rose 5.3% in 2025, a modest bump compared to the 23.2% surge in total compensation. Fixed cash is rarely where executive pay growth happens.

As Cynthia Doi, Principal Human Resource Business Partner, notes, “Base is less important for executives than it is for others. Other components of compensation, like stocks and bonuses, tend to be more important the higher you get in an organization.”

Short-term incentives, such as annual bonuses

“Executive pay should be outcomes-based,” says Cynthia. “There should be a variable component in pay, where their success and the company’s success are very closely tied.”

That’s where short-term incentives (STIs) come in as cash bonuses tied to one-year performance goals. While the board or compensation committee approves plan design and metrics, HR manages administration: communicating bonus eligibility, calculating payouts, and keeping plan documents current and compliant.

Long-term incentives, such as equity

Long-term incentives (LTIs) constitute the lion’s share of executive pay at public companies, and represent a good deal of administrative complexity. Equity—the distribution of restricted stock units (RSUs), performance stock units (PSUs), or stock options—remains the primary driver of CEO pay, with median stock award values climbing 38.8% year-over-year to $21.9 million in 2025.

LTI adoption is also expanding in the private sector: 82% of private companies offer LTI plans to support retention, with a growing shift away from traditional stock options toward restricted stock and performance shares.

Benefits and Perquisites

Executive benefits often extend beyond standard employee packages and carry distinct administrative weight for HR:

• Supplemental executive retirement plans (SERPs)
• Non-qualified deferred compensation arrangements
• Executive life and umbrella disability insurance
• Severance and change-in-control (golden parachute) agreements

Perquisites, or non-cash extras, carry heightened compliance significance. At public companies, perks exceeding specific financial thresholds require SEC proxy disclosure. Regardless of who negotiated the original package, HR ensures these non-cash arrangements are properly tracked, valued, and documented.

Executive compensation compliance: What HR needs to know

Knowing when to flag compliance considerations ensures potential risks are addressed proactively, and it’s one of HR’s most critical contributions to executive compensation. The following outlines the top compliance considerations to keep an eye on.

Key compliance checks

• SEC public disclosures and clawbacks: Track disclosure timelines and maintain documented recovery policies for incentive pay following financial restatements.
• IRC section 280G (golden parachutes): Contingent payments during a change of control that exceed three times an executive’s average annual compensation trigger a 20% excise tax for the executive and loss of tax deductions for the organization. HR should flag these triggers early during transaction planning.
• IRC section 409A (deferred compensation): Section 409A governs non-qualified deferred compensation timing and distributions. Non-compliance results in severe tax penalties for the executive, making strict adherence to election and distribution schedules essential.
• Nonprofit reporting (Form 990 and Sec. 4960): Ensure that public records reflect proper compensation reporting and monitor excise tax thresholds on top compensation.

How executive compensation compliance differs by company type

It’s important to evaluate executive pay through the lens of your company type, as compliance obligations, benchmarking sources, pay mix, and governance vary significantly across public, private, and nonprofit environments.

Below is an overview of the differences across company types, followed by a deeper dive into each.

Public companies

Public companies bear the heaviest regulatory responsibility and administrative complexity. Key elements and requirements include:

• Required proxy disclosure: Detailed reporting providing clear details on what top leaders earn (i.e., summary compensation tables, compensation discussion and analysis (CD&A), CEO pay ratio, pay-versus-performance tables, etc.)
• Say-on-pay: Non-binding advisory votes allowing shareholders to annually review and weigh in on executive pay packages
• Clawback policies: Exchange-mandated policies requiring recovery of excess incentive-based compensation following financial restatements

HR’s role at a public company

Even if Legal owns the annual proxy statement, HR typically supplies the underlying data for reports. To be a good partner for the legal team, it’s important for HR to get a lay of the disclosure landscape, which is actively changing shape.

In May of 2026, the SEC proposed rule changes that would make 80% of current public companies non-accelerated filers, significantly reducing their executive compensation disclosure obligations.

A non-accelerated filer is a company that doesn’t meet a certain revenue criteria, and under the proposal, those companies would no longer be required to conduct say-on-pay votes or produce a full CD&A disclosure. Final rules could be adopted by the end of 2026, and it’s an outcome HR professionals at smaller public companies should watch closely.

HR at public companies are also often uniquely responsible for coordinating multiple stakeholders in the work of administering executive comp—Legal, Finance, the compensation committee, outside counsel, or even independent compensation consultants. HR’s role is frequently to connect the dots and keep all the processes on schedule and data-backed.

Private and private equity (PE)-backed companies

Private companies operate with fewer public disclosure requirements, but without proxy data to benchmark against, sourcing reliable market comparisons for executive pay rates requires intentional effort. Target surveys, specialized benchmarking platforms, and peer-group analyses need to be done proactively instead of reactively.

Companies backed by private equity occupy a sort of middle ground between bootstrapped private companies and those that have gone public in terms of compensation philosophy and obligation to a PE firm’s investment thesis, or how they plan to make a profit with their investment. Growth targets, EBITDA thresholds, and exit timelines all shape LTI designs.

HR’s role at a private company

In PE environments, it’s important for HR to understand how equity or synthetic equity instruments (such as phantom stock or profits interests) function during liquidity events. But in general, one of the most important things for HR to address when managing executive pay at private companies is internal comms.

The absence of public disclosure doesn’t mean executive pay is unscrutinized. Employees talk, offer letters circulate, and internal pay equity questions surface regardless of company type. HR needs to prepare a defensible rationale for executive pay even when no one is legally required to see it.

Nonprofit organizations

HR at nonprofits encounter unique standards when it comes to disclosing and administering executive pay:

• Form 990: Administered by the IRS, this form facilitates public disclosure of compensation for officers, directors, and the five highest-paid non-executive employees. Form 990 disclosure isn’t the same as SEC disclosure for public for-profits, but it’s publicly available and matters deeply for nonprofits’ organizational reputation.
• IRC Section 4960 excise tax: This is a 21% tax on compensation exceeding $1 million paid to a nonprofits’ top five highest-compensated employees. In June 2026, the IRS announced plans to issue formal regulations expanding guidance on this provision.
• Establishing a defensible pay standard: For nonprofits, reasonable compensation is both a legal and reputational requirement. If your board follows and documents the proper benchmarking process, the IRS will generally assume your executive pay is fair (a legal concept known as a “rebuttable presumption of reasonableness”).

HR’s role at a nonprofit

While the board owns executive pay decisions, HR often supports their documentation process in much the same way HR assists in stakeholder collaboration at public companies. Another way HR can support leadership and Legal at nonprofits is by proactively tracking and flagging changing regulations in the space.

HR’s role in the executive compensation process

Even when a board or compensation committee sets the numbers, HR owns the internal infrastructure that makes executive compensation operational, compliant, and transparent (to different degrees in certain contexts). This can often feel like being a silent spectator in decisions that affect your day-to-day, but HR’s role here is a crucial one and can be broken down into four core responsibilities.

1. Informing and supporting the decision-making process

As HR, you are uniquely positioned to provide pivotal data and context to the people who decide how much executives should be making at your organization. SHRM describes this as HR’s most basic role in executive compensation, informing leadership and the board about the costs, options, and market context of executive programs while ensuring appropriate advisory support is in place. You provide perspective on internal pay equity, total rewards strategy, and how executive pay connects to the overall workforce experience.

2. Plan administration

Once an executive compensation package is approved, HR manages the ongoing logistics, including:

• Processing payout calculations for short-term incentives
• Coordinating equity grant approval schedules and vesting events
• Maintaining plan enrollments, SERPs, and insurance policies
• Updating executive compensation structures within the HRIS
• Maintaining audit-ready records

As HR, you’re the connector between executives, benefits carriers, outside counsel, vendors, and the internal teams responsible for grants, vesting events, and termination treatment.

3. Compliance coordination

For HR, a core compliance competency is knowing enough to ask the right questions and escalate to the right people at the right time. As an HR pro, you likely don’t aspire to replace Legal or stand in for outside counsel, but you may very well be the first person to recognize when an executive compensation matter has compliance implications. This can include:

• Flagging when a deferred compensation arrangement may implicate Section 409A
• Recognizing when a severance negotiation may trigger 280G
• Ensuring that required disclosures are on the calendar at public companies

4. Communication

Communication failures can derail any program faster than a lack of funding, and navigating tough conversations is where HR pros get to shine the brightest.

HR manages executive comp communication on two fronts: explaining total compensation value directly to executives, and supporting clear, values-aligned messaging to the broader workforce, board, and, in some cases, the media.

The organizations where these efforts yield the most productive results are the ones in which HR has built the process infrastructure to support an executive pay program, not just defaulted to fielding requests as they come in.

How to benchmark executive pay

While executive benchmarking is typically initiated by the board or compensation committee—often with the help of an outside consultant—HR participates in the process by ensuring peer groups are accurate, data sources are credible, and positioning aligns with organizational goals.

HR’s job here isn’t to conduct the analysis or lead the conversation, but to be a credible contributor to the conversation and to leave with a solid grasp of the pay package they will eventually administer.

Where the data comes from

• Third-party executive surveys: Data compiled by consulting firms aggregating market rates across industries and revenue bands.
• Proxy filings (SEC Form DEF 14A): Public disclosures containing exact compensation breakdowns for NEOs. Reviewing peer proxy filings provides clear visibility into competitive structures and is one of the most useful exercises HR can do to build fluency in executive pay.
• Internal HR benchmarking tools: Specialized platforms like BambooHR® Compensation Benchmarks (powered by Mercer data) give HR teams direct access to reliable market data, which is especially helpful if you’ve been asked to provide market context but you don’t have access to a consultant.

Understanding peer groups

Peer groups are the most important variable for HR to scrutinize when the board, Finance, or a consultant presents their benchmarking data. A peer group must reflect the actual market for leadership talent based on company revenue, headcount, industry, geography, and organizational complexity. Mismatched peer groups will produce benchmarks that are off-market and hard to defend.

HR helps evaluate peer lists by asking the following questions, and pushing against vague or unsatisfactory answers:

• Are these companies we realistically compete with for executive talent?
• Is the revenue and headcount scope comparable to our organization?
• Are there outliers making the peer-group median less representative of the market we actually compete in?

Percentile targeting in practice

Once you have your peer group to compare against, benchmarking data is typically present in percentile terms, where targets are described as being in the 25th, 50th, or 75th percentile of the peer group for each pay component.

Targeting the 50th percentile aligns pay with market medians, while the 75th percentile positions pay above most comparators. The appropriate target depends on the company’s compensation philosophy, talent strategy, financial position (i.e., competitive posture), and how critical a particular role is to the business.

Understanding percentile positioning helps HR:

• Support board conversations
• Explain pay decisions to executives
• Contextualize packages during offer negotiations
• Recognize when a proposed package is significantly out of step with market norms

Communicating and defending executive pay internally

With median CEO pay ratios reaching 200:1 among S&P 500 companies in 2025 (up from 189:1 in 2024), and nearly half of employees feeling underpaid, HR resides in a tricky spot between executive strategy and general employee perceptions.

Your typical CEO does not make $29 million a year—or even a cool million—but most people hold these staggering numbers in their heads when they look at their own executive teams and wonder how much they’re taking home compared to themselves and their peers.

Research shows nearly 9 in 10 employees want greater transparency, candor, and visible leadership from the C-suite, and executive pay is one of the most walk-the-walk signals of whether an organization lives up to its stated values.

Actionable communication strategies for HR

As more states pass pay range disclosure laws, employees have more information than ever about compensation across levels. HR should treat executive pay communication as part of a coherent compensation strategy and philosophy, not an isolated crisis management exercise when perceptions about executive pay reach a boiling point.

We recommend using an internal communication framework:

• Share the process: Focus on governance, benchmarks, and strategy.
• Protect individual confidentiality: Separate process from figures.
• Connect pay to strategy: Highlight performance alignment.
• Prepare managers for transparent conversations: Provide clear talking points and guidance.

Share the process, and the rationale behind it

Explain how pay decisions are made. Emphasize board governance, independent market benchmarking, and performance targets. Process transparency builds organizational credibility.

Clarify confidentiality

Differentiate between public and regulatory disclosures and private employee data. Explain the overall philosophy consistently without disclosing non-public individual figures or shutting down employee questions about pay.

Connect pay to business outcomes

Outline how executive LTI and STI structures hold leaders accountable to organizational performance and long-term stability.

Equip managers

Employees often raise compensation questions with direct supervisors first. Provide managers with clear talking points so messaging remains consistent across the business.

Building a review cadence for executive pay

Executive compensation requires continuous management. Market benchmarks shift, business strategies evolve, and regulatory obligations get updated. A package that was competitive and compliant when it was designed may not stay that way without a baked-in review process.

Recommended governance cadence

• Annual review: Align with the board’s compensation calendar to review market benchmarks, ensure plan documents are current, process incentive calculations, and audit regulatory updates.
• Off-cycle triggers: Re-evaluate packages during major structural changes, such as mergers, acquisitions, leadership transitions, or significant changes in business strategy.

Centralizing employee records, benefits administration, and compensation benchmarks within a platform like BambooHR^® helps HR teams maintain clarity, streamline oversight, and manage total rewards with confidence (without having to book a full consulting engagement every cycle).