1. Compensating Executives
Chapter Thirteen
Compensating Executives

2. 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

3. 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.

4. 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

5. (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)

6. 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

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

8. 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

9. 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