FIN 4020: Executive Compensation

If a manager increases shareholder wealth by $261m, his/her own wealth increases by:

$680,000

The main purpose of deferred compensation (for the executive) is:

to put off paying taxes

If a manager increases shareholder wealth by $276m, his/her own wealth increases by:

0.71

Happy Hawg Holdings (HHH) has a new compensation plan up for vote. HHH has 912m shares outstanding. They are asking for an additional 51.8m shares to be covered under the plan. The plan currently covers 22.6m shares. HHH has 100.9m shares available for future grants under all plans and 124.5m options existing under all plans. What is the proposal dilution?

5.68%

Happy Hawg Holdings (HHH) has a new compensation plan up for vote. HHH has 796m shares outstanding. They are asking for an additional 58.9m shares to be covered under the plan. The plan currently covers 24.1m shares. HHH has 105.2m shares available for future grants under all plans and 147.2m options existing under all plans. What is the proposal dilution?

7.40%

What type of options would you issue a manager if you want him/her to increase the value of the firm?

call

Stock appreciation rights (SARs) pay off in:

cash

___________ plans increase the number of the shares covered under the plan automatically, usually in relation to the number of shares outstanding.

evergreen

Which of the following may result in automatic "no" votes for your plan?

excessive dilution, lack of information, and evergeen plans

The issue of stock options prior to the approval of shares under the plan is known as:

gun-jumping grants

Omnibus plans cover:

multiple securities

You own a put option on a share of stock with an exercise price of $10. The stock sold for $12 on the day that you purchased the option. The stock is currently trading at $11. The option is:

out of the money