7. Executive compensations packages often include a base salary, an annual incen

Question

7. Executive compensations packages often include a base salary, an annual incentive, and a long-term 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 long-term performance-based 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.

Explaination: The incentives are normally tied up to Individual Performance and company's preformance. Therefore, it can't be linked to earning per share and value of stock.

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