1. Chapter 11: Compensating Executives
MGT 4543: Compensation Management

2. Components of Current Core Compensation
What is a key employee?
Does annual base pay account for a large or small portion of an executive’s pay?
Why are bonuses given to executives?

3. Components of Current Core Compensation
Explain the following:
Discretionary bonuses
What are considerations for awarding these?
Performance-contingent bonuses

4. Components of Deferred Core Compensation
What is deferred compensation?
Why is deferred compensation used as an incentive?
Explain why deferred compensation is advantageous to executives in terms of tax treatment.

5. Stock Terminology Explain each of the following (Table 11-1)
Stock option
Stock grant
Exercise of stock
Disposition
Fair market value

6. Components of Deferred Core Compensation
What is an incentive stock option?
How is a non-statutory stock option different from an incentive stock option?
What is restricted stock?
What is phantom stock?

7. Components of Deferred Core Compensation
What is a golden parachute?
Why was Sarbanes-Oxley signed into law?

8. Employee benefits What are perquisites? Provide examples of perks
Provide examples of perks
What are the two purposes of perks?

9. Principles and processes for setting executive compensation
What do executive compensation consultants do?
What is the purpose of a board of directors?
Why might it be an ethical problem when boards determine CEO compensation?

10. Principles and processes for setting executive compensation
What is the purpose of having board members from outside the company on the organizations’ compensation committee?
Agency theory – why can’t owners represent their own interests?
What is the agency problem?

11. Executive compensation disclosure rules
What is the SEC?
What is the one of the main goals of the SEC regarding prospective investors?
What is a 10k and what role does it play in informing investors?

12. Say on Pay & Strategy List the three provisions of the Dodd-Frank Act
Is there evidence that higher CEO pay and higher firm performance are related?