Executives are covered by a wide range of compensation arrangements, which will be discussed in our new series. These arrangements may include agreements between several employees or it may consist solely on individual agreements between the company and one executive. Typical arrangements include nonqualified deferred compensation and stock option programs due to their tax benefits. There is, however, a limit on a company's deduction for compensation of certain employees in excess of $1 million - a limitation that applies to the chief executive officer and the four other most highly compensated employees. However, performance-based compensation is not subject to the deduction limitation. Studies have indicated that the deduction limitation may have led to some substitution away from salary compensation toward performance-based compensation, but that growth in overall executive compensation has not been reduced.

Our series will primarily explore the various types of stock-based compensation, which includes stocks, stock options (right to purchase shares by a certain date), restricted stock (stock with restrictions tied to them, such that can't be sold for a certain amount of time, etc.), stock appreciation rights (the right to the gains of the stock as if you owned it), and phantom stock (artificial shares that the company values at the going market rate).