Business formation and planning are essential elements of a successful business. A primary element of business formation for California businesses is the method of calculation for executive compensation. Executive compensation is a key element for business formation as it can set a precedent for the company’s executives and potentially have a significant impact on a company’s budget.

The cereal brand Post has taken a unique stance on the business formation and planning behind their executive compensation package. The formation of the executive compensation package is unique in the sense that the chief executive officer of Post Holdings only makes a yearly salary of $1. At first glance this may seem like a small amount of compensation for the CEO of a major company, but the business planning behind the calculation of the company’s executive compensation package relies primarily on stock options.

Even though the CEO of Post Holdings only earned a salary of $1, his total compensation package for fiscal year 2012 was an estimated $22.7 million. The bulk of the compensation package awarded to the CEO is based on option awards and stock awards. Noticeably absent from the CEO’s compensation package were any awards from cash bonus programs or other traditional benefit plans that are commonly used for executive compensation packages.

The method of calculation for a company’s compensation package is essential to the business formation and planning of a company. Well-planned compensation scales can set a company in the right direction and ensure that the compensation packages meet the goals of all interested parties to the company. An experienced attorney can help devise a successful business formation for the future success of a company.

Source: St. Louis Business Journal, “Post Holdings CEO Stiritz’s total pay nears $23 million in 2012,” Diana Barr, Jan. 2, 2013