Executive Benefits In The Small To Mid-Sized Business Markets
By Steven R. Craig
The meltdown at Enron has brought mainstream national attention to the issue of executive compensation–not just cash and stock options, but benefits which utilize that glamorous tool of corporate finance, life insurance.
This, piggy-backed on the split-dollar controversies of recent years, has the wind of turmoil swirling around long accepted business uses of life insurance. But change breeds opportunity and it would be a mistake to assume that these proven planning techniques are no longer valid.
The fundamentals behind the use of life insurance in the business arena are as strong today as they have ever been. With a little polish and some new packaging, many of these tools will serve the business market for years to come.
A perquisite, according to the Merriam Webster Dictionary, is defined as a privilege, gain, or profit incidental to regular salary or wages; especially: one expected or promised. These perks, as they are commonly known, have become a critical component of an overall compensation plan.
While the closely held corporate market is vastly larger than the public company market, a number of producers have very successfully developed a clientele among executives of public companies. While the bar to enter this market is high, once achieved the rewards can be phenomenal.
Suddenly, the concept of “corporate governance” has entered dinner table parlance, and generous deferred compensation deals, protected by offshore rabbi trusts and equity split-dollar arrangements, are seen as evil excesses enjoyed by senior execs at public companies. The agents serving this market are busier than ever, not writing new business, but figuring out how to salvage old business and old relationships.
The media and government-proclaimed crisis in corporate governance aside, businesses–large and small, public and private–still have a critical need to attract, retain and reward the employees most responsible for the success of that business.
While the Fortune 1000 companies engage consulting firms to develop executive compensation programs, smaller, closely held businesses dont get the same attention. By their nature, these smaller businesses are unequivocally more dependent on their key employees.
A producer can become an indispensable resource to business owners and CFOs as well as outside financial advisors if he can help them answer some of the following questions:
How can I attract top talent without giving away the store in salary?
How can I retain and reward that talent so they are not lured away by my competitors or tempted to go off on their own?
How can I provide for an orderly succession plan at my retirement or death?
How can I use the business to finance my personal needs and those of my key people?