Executive compensation packages often include a base salary, an annual incentive

Question

Executive compensation packages often include a base salary, an annual incentive, and a longterm incentive. What role do accounting numbers have on these incentives?

A. Nearly all companies use performance plans that are tied to accounting numbers

B. Return on equity and earnings per share are the most common accounting measures used in both annual and longterm performancebased plans.

C. Earnings growth translates into increased shareholder value, increasing the value of stock options to managers.

D. All of the above

Explanation / Answer

A. Nearly all companies use performance plans that are tied to accounting numbers.

Incentives will be paid based on the performance of the employee as well as performance of the Company. However, though the Company may not fare very well, yet the incentives will be paid to employees to keep them motivated. Therefore, the earning per share and increased shareholder value doesn't have much impact on the incentives.

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.