summer mgmt 494 ch. 12

What was the median annual earnings for all U.S. civilian workers in 2009? A) $45,790 B) $51,980 C) $46,120 D) $41,778

$45,790

In 2011, the average CEO earned how much more annually than the average shampooer? A) 12 times greater B) 38 times greater C) 74 times greater D) 178 times greater

178 times greater

The SEC's Summary Compensation Table contains data covering how many years? A) 3 B) 5 C) 7 D) 10

3

The SEC requires compensation information on the CEO and how many of the highest paid executives? A) 10 B) 7 C) 4 D) 2

4

What is the advantage of compensation deferment until retirement for a CEO? A) The CEO can benefit from interest rates until retirement. B) After retirement, the company's stock value will probably be higher. C) The CEO's income taxes will probably be lower after retirement, so that deferring payment should lead to lower taxation. D) The CEO will have enough time to make progress on reaching the company's strategic goals.

After retirement, the company's stock value will probably be higher.

Using this executive compensation theory, shareholders negotiate the compensation contracts with the executive in hopes of aligning the executive's interests with theirs. A) agency B) tournament C) social comparison D) strategic

agency

A short-term incentive plan would most likely be used for which company employee? A) a sanitation worker B) a new employee in training C) a mid-level manager D) the company's CEO

companys ceo

When he became CEO, Duane was given a stock option that does not require him to exercise his options in order to receive income. Which plan is it? A) stock appreciation rights B) discount stock C) restricted stock D) golden parachute

stock appreciation rights

The IRS considers Sylvia to be a highly compensated employee for Beautiful Pictures, Inc., which means she has at least one of which of the following qualifications in the preceding year? A) 1% owner in the top paid employee group B) 5% owner in the top paid employee group C) made over $50,000 D) made over $75,000

5% owner in the top paid employee group

Restricted stock generally allows the executives ownership of the stock after how many years? A) 20-30 B) 5-10 C) 3-5 D) 1-3

5-10

Under the Troubled Assets Relief Program (TARP), banks with financial assistance from the federal government can only deduct how much annually for an executive's pay as a business expense? A) $100,000 B) $200,000 C) $500,000 D) $1,000,000

500,000

Under SEC rules, which of the following is true? A) Shareholders may be subject to personal liability for paying excessive executive compensation. B) Publicly held corporations must disclose executive compensation information to shareholders, but not the public. C) Board of director members can sue a corporation for excessive executive compensation. D) Board of director members may be subject to personal liability for paying excessive executive compensation.

Board of director members may be subject to personal liability for paying excessive executive compensation.

XYZ Pharmaceuticals recently announced that the clinical trials for a cancer drug failed to cure the illness. This announcement led to a dramatic decrease in the stock value of the company. The company hired a new CEO two years ago when the clinical trials for this drug had already initiated. Which one of the following is true about the compensation of the CEO of XYZ Pharmaceuticals? A) The CEO should receive lower compensation since shareholder returns have been declining. B) The CEO was not involved in the decision of the failed initiative; therefore he/she should not receive lower compensation. C) There is no simple answer as to what should be the compensation level of this CEO. D) The compensation of this CEO depends only on pretax profit margins, so we need more information to decide on the compensation of this CEO.

There is no simple answer as to what should be the compensation level of this CEO.

Which of the following are the two main components of current core compensation? A) base pay and bonuses B) base pay and legally required benefits C) bonuses and legally required benefits D) base pay and discretionary benefits

base pay and bonuses

This is the difference between the stock price at the time of purchase and the lower stock price at the time an executive receives the stock option. A) disposition value B) discounted value C) fair market value D) capital gains

capital gains

XYZ Co. took back performance-based compensation of $1.2 million from their CEO because of his decision of the buyout of another firm that eventually lowered the overall value of the XYZ Co. Which of the following compensation agreements allowed the board of directors to take back this $1.2 million? A) platinum parachutes B) clawback provisions C) phantom stock D) golden parachute

clawback provisions

This refers to the sale of stock by the stockholder. A) stock option B) stock grant C) disposition D) exercise of one's grant

disposition

After the recent merger of ABC and XYZ Airlines, the former CFO of XYZ Airlines, John, lost his employment in the newly merged airline. Which compensation agreement extends pay and benefits for John? A) discount stock option plans B) incentive stock options C) phantom stock D) golden parachutes

golden parachutes

As the vice-president, Sheila will receive short-term incentive compensation awards based on which two conditions? A) her rank and compensation level B) her age and department C) her department and rank D) her age and compensation level

her rank and compensation level

Which of the following stock options entitle an executive to purchase company stock in the future for a predetermined price? A) nonstatutory stock options B) incentive stock options C) restricted stock options D) phantom stock options

incentive stock options

Which type of stock options does not give executives favorable tax treatment? A) incentive B) restricted C) nonstatutory D) phantom

nonstatutory

This type of executive bonus plan is similar to the appraisal system used to determine merit increases for non-executive employees. A) performance-incentive B) target C) performance-allocation D) performance-contingent

performance-contingent`

The recently appointed CEO of XYZ Inc. uses a luxury summerhouse owned by the company for rest and relaxation with his family as well as a place to invite important clients before a lucrative business deal. XYZ Inc. also provides a membership to an exclusive country club to its CEO. These kinds of benefits offered to CEOs are called A) discretionary bonuses. B) perquisites. C) golden parachutes. D) clawback provisions.

perquisites

An insurance company's board of directors decided to promise Katherine, one of their recently hired senior executives, to pay a bonus that is equal to the value of 10,000 company shares at the time she started to work. What type of compensation arrangement did the board of directors promise? A) discount stock option plans B) incentive stock options C) phantom stock D) golden parachutes

phantom stock

This type of executive bonus is based on a bonus pool that is determined by a fixed-formula that is not determined by the executive's performance. A) target plan B) predetermined allocation C) performance-contingent D) discretionary

predetermined allocation

What is the term used when a company offers stock to its employees? A) stock allocation B) stock option C) stock grant D) stock disposition

stock grant

These rights provide employees with an opportunity to purchase a number of stocks at a designated price within a specified period of time. A) stock option B) stock grant C) disposition D) exercise of one's grant

stock option

Which executive bonus amount varies with the extent to which a pre-established minimum performance level is met? A) target plan B) predetermined allocation C) performance-contingent D) discretionary

target plan

What does the IRS use the term "key employees" for? A) for non-discrimination rules in retirement benefits B) for non-discrimination rules in health insurance benefits C) to determine the necessity of top-heavy provisions in employer-sponsored qualified retirement plans D) to determine the necessity of top-heavy provisions in employer-sponsored health insurance plans

to determine the necessity of top-heavy provisions in employer-sponsored qualified retirement plans

In the end, Yolanda beat Tristen and Michel in a series of competitions among top-level managers to become CEO of National LemGlass. Which compensation theory did the company probably use? A) tournament B) competition C) comparison D) agency

tournament