Ch 11 Study Plan
According to economic theory, CEO compensation should be set ________. A. through negotiation B. by the buyer C. by the seller D. by an unbiased third party E. by using the market's going price
a
If Coca-Cola makes it possible for its executives to buy Coke stock shares in the future at a predetermined price, Coca-Cola is granting the executives a(n) ________. A. incentive stock option B. restricted stock unit C. nonstatutory stock option D. employee stock purchase plan E. phantom stock plan
a
Named executive officers (NEOs) are the ________. A. four most highly compensated officers after the CEO B. officers in charge of employee compensation C. top executives who make strategic decisions D. officers in charge of company finances E. two highest paid officers in an organization
a
A right granted by a company to an employee to purchase a number of stocks at a designated price is called a(n) ________. A. discretionary bonus B. stock option C. stock grant D. exercise of stock E. stock disposition
b
If a CEO were to attempt to influence the compensation committee by using data from other CEOs who had higher compensation in the same industry, this would be an example of ________. A. tournament theory B. social comparison theory C. conflict theory D. agency theory E. the agency problem
b
Which statement is FALSE regarding the "say on pay" provision of the Dodd-Frank Act? A. The say on pay provision requires shareholders to say yes or no on executive compensation. B. The say on pay provision states that the shareholder vote is a binding vote. C. The say on pay provision gives the board of directors an indication of how shareholders feel about executive compensation. D. The say on pay provision applies to golden parachute agreements for executives. E. The say on pay provision applies to deferred compensation for executives.
b
Which type of executive compensation does NOT need to be reported to the Securities and Exchange Commission? A. Stock awards B. Paid time off C. Pension plan D. Bonuses paid E. Salary
b
A Definitive Proxy Statement under section 14A of the SEC deals with the ________. A. amount of money paid to the people who serve on the board of directors B. total compensation paid to all of the employees in a given year, excluding executives C. compensation given to the CEO and the four most highly compensated officers D. total compensation paid to the CEO in a given year E. total amount paid to corporate consultants in a given year
c
When executives are paid large bonuses to leave the company because of their low performance, it is commonly referred to as ________. A. phantom stock B. a golden parachute C. pay-for-failure D. deferred compensation E. say on pay
c
In a corporation, ________ are often responsible for making executive pay recommendations to the board of directors. A. company shareholders B. employees C. chief financial officers D. corporate vice presidents E. compensation committees
e
The SEC Act of 1934 deals with ________. A. financial settlements with union leaders B. the amount of money given to company lobbyists in Washington, D.C. C. the transparency of executive compensation practices D. the number of employees a company has E. corporate financial information and executive compensation
e
The main components of executive compensation include: A. Core compensation, discretionary benefits, and nondiscretionary benefits B. Person-focused pay and organization-focused pay C. Core compensation, deferred core compensation, and nondeferred compensation D. Core compensation and benefits E. Core compensation, deferred core compensation, employee benefits, and clawback provisions
e
With performance-based pay, successful performance usually leads to ________. A. anger among nonperformers in the company B. new motives to work for a competing firm C. unrealistic expectations about promotions D. more challenging performance standards E. merit and incentive awards
e
Which of the following documents is intended to make executive compensation more transparent by showing core and deferred compensation? A. Summary compensation table B. All other compensation report C. Consultant recommendations report D. Executive compensation budget E. Definitive proxy statement
a
Which of the following would be hired by a firm to recommend executive compensation packages based on strategic analyses? A. Executive compensation consultants B. An executive committee C. External members of a company's board of directors D. The compensation committee E. Internal members of a company's board of directors
a
In 2014, the typical percentage of total compensation awarded in equity plans for U.S. CEOs was approximately ________. A. 30 percent B. 50 percent C. 25 percent D. 40 percent E. 70 percent
b
Total sales, stock price, and assets fall under which of the following corporate performance measures? A. Profitability B. Size C. Leverage D. Liquidity E. Capital markets
b
Under this agreement, the board of directors is allowed to take back an executive's performance-based compensation if it finds performance expectations were not met. A. Stock option B. Clawback provision C. Platinum parachute D. Phantom stock plan E. Disposition
b
A conflict of interest can occur between the CEO and the compensation committee when the ________. A. CEO communicates directly with shareholders the desire for more pay B. CEO negotiates with the compensation committee to receive a huge bonus in the event the CEO is terminated C. CEO hires an outside consultant to make recommendations to the compensation committee D. CEO appoints the president of the board of directors E. bulk of the CEO compensation package is based on stock performance, which in turn benefits the shareholders
c
A professional consultant can create a conflict of interest when hired by a CEO to determine his or her compensation. In what way can a professional compensation consultant create this conflict? A. By keeping the interest of the shareholders and the interest of the board of directors in mind B. By receiving a higher fee or payment for recommending a salary raise for the CEO's friends in the company C. By conducting an objective analysis of executive compensation and being tasked with protecting the financial interest of the CEO D. By identifying with the workers and recommending that the workers rather than the executives receive raises E. By recommending the services of friends and family to the CEO
c
The Internal Revenue Code (IRC) recognizes two groups that play a major role in a company. Which ones are they? A. Top executives and accounting experts B. Blue-collar workers and their supervisors C. Highly compensated employees and key employees D. Supervisors and union leaders E. Core employees and contingent workers
c
Which of the following allows company shareholders to have a say in executive compensation proposals? A. Social Security Act B. Securities Exchange Act C. Wall Street Reform and Consumer Protection Act D. U.S. Securities and Exchange Commission revised rules of 2008 E. Securities and Exchange Commission revisions of 1992 and 1993
c
Which of the following is true regarding the comparison between U.S. and foreign executive compensation? A. Foreign companies aren't concerned with profits or productivity, B. Executives in other countries are paid on the same level as executives in the United States. C. There is little disclosure or transparency of executive compensation in other countries. D. Currency conversions make comparisons too difficult. E. It is too difficult to understand the responsibility level of executives in other countries.
c
Boards of directors are usually composed of ________. A. no more than 5 members B. 6 or 7 key players C. retired CEOs of small companies D. approximately 15 members E. 20 or more members
d
Each of the following is a duty performed by a compensation committee EXCEPT ________. A. consulting with tax and legal experts B. discussing the assets and liabilities of the recommendations of the consultant C. making recommendations to the board of directors D. discussing the alternate options for compensation with the CEO E. reviewing the compensation consultant's recommendations
d
Executive compensation plans are said to be top heavy if the account balances for key employees exceed ________. A. 40 percent of the dividends paid to shareholders in that fiscal year B. 40 percent of the account balances for all employees C. 60 percent of the dividends paid to shareholders in that fiscal year D. 60 percent of the account balances for all employees E. 50 percent of the firm's profits from that fiscal year
d
In a discussion of theoretical explanations for setting executive compensation, the actions of executives in their own self-interest are known as ________. A. agency theory B. conflicts of interest C. social comparison theory D. the agency problem E. tournament theory
d
The Internal Revenue Code (IRC) defines highly compensated employees by certain criteria. Which of the following is NOT one of the criteria? A. A 5 percent owner in the current or preceding year B. An employee in the top-paid group of people in the company C. An employee that made more than $120,000 in 2015 or the preceding year D. A 20 percent owner in the current or preceding year E. An employee in the top 20 percent of highest-paid employees
d
Which of the following applies to the disclosure of executive compensation practices? A. Wall Street Reform and Consumer Protection Act B. Emergency Economic Stabilization Act C. Social Security Act D. Securities and Exchange Act E. U.S. Department of Treasury regulations
d
Which of the following are non-deferred incentives that are designed to reward executives for achieving intermediate performance goals? A. Capital gains B. Stock compensation C. Incentive stock options D. Short-term incentives E. Equity plans
d
Which of the following best describes an executive? A. A company employee who manages subordinates B. A company employee who plays a key role in promoting products and services C. Any person in the company who is a decision maker D. A company leader who directs the implementation of competitive strategies E. Any person in the company who owns company stock
d
When designing executive compensation, consultants consider strategic analyses, which are based on ________. A. the financial outlook in the markets B. the amount of international experience an executive has C. the competition for the skills of a potential candidate D. the experience and past record of the executive E. external market context and internal analysis
e
Which of the following is a true statement about executive compensation packages? A. Executive compensation emphasizes nonmonetary rewards. B. Executive compensation emphasizes short-term rewards. C. Executive compensation depends more on core compensation and less on benefits and deferred rewards. D. Executive compensation is mostly in the form of benefits and less in cash awards. E. Executive compensation emphasizes long-term rewards and deferred compensation.
e
Which of the following is responsible for the designations of key or highly compensated employees? A. Dodd-Frank Act B. Securities Exchange Act C. Social Security Act D. Executive compensation consultants E. Internal Revenue Code (IRC)
e
Which of the following is true of key employees? A. Key employees must hold a college degree. B. A key employee is the same as a highly compensated employee. C. A key employee must be one of the top 20 percent most highly compensated employees at the company. D. Key employees have substantial experience with the company. E. A key employee is an officer of the company having an income greater than $170,000 or a 5 percent owner of the business.
e
Which of the following questions is LEAST relevant to ask when determining whether U.S. executives are overpaid? A. What is the spread between executive pay levels and the pay rates of nonexecutive employees? B. Is executive pay fair and equitable? C. Is executive pay tied to corporate performance? D. Does the company maintain competitive advantage in the global market? E. Are the company's executives qualified?
e
