Compensating Executives Chapter Thirteen Compensating Executives

Figure 13-1 Examples of Key Employees Chief Exec. Officer President Executive VP VP Accounting VP Finance VP HR VP Mftg. VP Marketing Director Accounting Director Finance Director HR Director Mftg. Director Marketing Managers Supervisors Accountants Clerical Staff Managers Supervisors Fin. Analysts Clerical Staff Managers Supervisors HR Specialists Clerical Staff Managers Supervisors Prod. Workers Clerical Staff Managers Supervisors Specialists Clerical Staff

Table 13-2 Employee Stock Terminology Stock option. A right granted by a company to an employee to purchase a number of stocks at a designated price within a specified period of time. Stock grant. A company’s offering of stock to an employee. Exercise of stock grant. An employee’s purchase of stock using stock options. Disposition. Sale of stock by the stockholder. Fair market value. The average value between the highest and lowest reported sales price of a stock on the New York Stock Exchange on any given date. The Internal Revenue Service specifies whether an option has a readily ascertainable fair market value at grant. An option has a readily ascertainable fair market value if the option is actively traded on an established stock exchange at the time the option is granted.

Table 13-4 Common Executive Perks Company cars Financial services Legal services (for example, income tax preparation) Recreational facilities (for example, country club and athletic club memberships) Travel perks (for example, first-class airfare) Residential security Tickets to sporting events

(for example, financial analyst) Figure 13-2 CEO Compensation as a Tournament Chief Executive Officer Pres. Vice President Compensation ($) Director Manager Professional (for example, financial analyst)

Stock option and stock appreciation right tables Table 13-5 Securities and Exchange Commission Disclosure Requirements for Executive Compensation Stock option and stock appreciation right tables Long-term incentive plan table Pension plan table Performance graph comparing the company’s stock price performance against a market index and a peer group Report from the compensation committee of the board of directors explaining compensation levels and policies Description of the directors’ compensation, disclosing all amounts paid or payable Disclosure of certain employment contracts and golden parachutes

Table 13-7 Corporate Performance Measures (1 of 3) Size Sales Assets Profits Market value Number of employees Growth

Table 13-7 Corporate Performance Measures (2 of 3) Profitability Profit margin Return on assets (ROA) Return on equity (ROE) Capital Markets Dividend yield Total return to shareholders Price/earning ratio Payout

Table 13-7 Corporate Performance Measures (3 of 3) Liquidity Current ratio Quick ratio Working capital from operations Cash flow from operations Leverage Debt-to-equity ratio Short-term vs. long-term debt Cash flow vs. interest payments