Ch 11.docx

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Department
Business Administration
Course
BUS 421
Professor
Howard Trottier
Semester
Winter

Description
Ch 11: Executive Compensation 3 main components of compensation plan: 1. ST incentives based on Earnings or shares 2. LT stock options based on Share price performance 3. MT awards based on mix of 1 and 2 Sensativity: Response to manager effort Precision: Reciprocal of variance of noice of measure, lower noise higher precision Increase NI sensitivity: Increase recognition lag with CV accounting and full disclosure o Reduces precision Share Price: o Low precision due to economic factors like in
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