1. TMTs & Executive Compensation

2. Top Management Team CEO, CFO, CIO, CMO, CAO, COO, CTO, CPO, CNO, CKO, CLO

3. Top Management Team What do they do (key activities)? Work with BOD Establish culture. Be the face of the company. Set the vision, mission, values, set ethical standards Develop talent Major budgetary decisions Managing inter-organizational resources Increase shareholder value (respond to analysts, engage investors) Make market decision Sign off on financial statements, be legally accountable Make strategic decisions, Ask the big questions, Guide lower level managers Represent company with strategic partners Enforce accountability Gather external information Accumulate and distribute knowledge

4. Executive Decision Making Rational Decision-Making Model -Evaluation is not iterative -Takes too long -Doesn’t address importance/level -Experience based -No pilots/testing -Identifying the wrong problem -Too rigid, too focused -No contingencies -Many strategic alternatives are not obvious -No single best decision -Evaluation is underspecified -Assumes complete information -Assumes no cost or time constraints

5. Decision Biases Anchoring and adjustment Availability bias Escalation of commitment Fundamental attribution error

6. Decision Biases Correlation vs. causation Overconfidence Sampling bias (selection bias)

7. Executive Compensation In most publicly traded firms, CEO compensation generally includes: Guaranteed salary Cash bonus Stock options Perks

8. Executive Compensation How much do they make? Highest paid 2014 CEOs: McKesson $131M Lauren $67M Vornado Realty $64M Kinder Morgan $61M Average CEOs S&P 500 Overall U.S. $10.5M Alabama $4.5M Average TMT (incl CEOs) Overall U.S. $6.1M

9. Executive Compensation Are CEOs paid too much?