1. C HAPTER 12: C OMPENSATING E XECUTIVES MGT 4543: Compensation Management

2. C OMPONENTS OF C URRENT C ORE C OMPENSATION Does annual base pay account for a large or small portion of an executive’s pay? Why are bonuses given to executives? Explain the following: Discretionary bonuses What are considerations for awarding these? Performance-contingent bonuses

3. C OMPONENTS OF D EFERRED C ORE C OMPENSATION 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.

4. C OMPONENTS OF D EFERRED C ORE C OMPENSATION 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?

5. C OMPONENTS OF D EFERRED C ORE C OMPENSATION What is a golden parachute? Why was Sarbanes-Oxley signed into law?

6. E MPLOYEE BENEFITS What are perquisites? Provide examples of perks What are the two purposes of perks?

7. P RINCIPLES 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?

8. P RINCIPLES 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?

9. E XECUTIVE COMPENSATION DISCLOSURE RULES What is the SEC? The two objectives of the SEC rulings on reporting of executive pay: _______________________ presentation of compensation paid to the CEO and four most highly paid executives To increase _____________________ of company boards of directors for executive compensation policies and decisions.

10. S AY ON P AY & S TRATEGY List the three provisions of the Dodd-Frank Act Is there evidence that higher CEO pay and higher firm performance are related?