Businesscompetitionispressurefilledand demanding

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Unformatted text preview: its Perquisites (perks) Executive Compensation Executive Compensation Justifications Large financial incentives reward superior performance. Business competition is pressure­filled and demanding. Good executive talent is in great demand. Effective executives create shareholder value. Types of Long­Term Incentive Plans Stock options Rights granted to executives to purchase shares of their organization’s stock at an established price for a fixed period of time. Stock price is usually set at market value at the time the option is granted. Stock appreciation rights (SARs) Cash or stock award determined by increase in stock price during any time chosen by the executive in the option period; does not require executive financing. Stock purchase Opportunities for executives to purchase shares of their organization’s stock valued at full market or a discount price, often with the organization providing financial assistance. Phantom stock Grant of units equal in value to the fair market value or book value of a share of stock; on a specified date the executive will be paid the appreciation in the value of the units up to that time. Restricted stock Grant of stock or stock units at a reduced price with the condition that the stock not be transferred or sold (by risk of forfeiture) before a specified employment date. Performance units Grants analogous to annual bonuses except that the measurement period exceeds one year. The value of the grant can be expressed as a flat dollar amount or converted to a number of “units” of equivalent aggregate value. Performance shares Grants of actual stock or phantom stock units. Value is contingent on both predetermined performance objectives over a specified period of time and the stock market. Executive Compensation: Executive Compensation: Ethics and Accountability Incentive payments are excessive compared with return to stockholders. Time periods for judging and rewarding performance are too short. Quarterly earnings growth is empha...
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