| Incentive Contracts | Managerial Compensation Plans | Theory of Executive Compensation |
|---|---|---|
|
net income and share price
What are the two performance measures
|
short-term
mid-term long-term
Name two of the three incentive components
|
sensitivity of net income and share price
Two performance measures of determining managers overall performance
|
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to motivate manager performance and inform investors
What is the role of net income
|
by using multiple performance measures instead of only one
What increases the efficiency of compensation contract
|
using current value model
full disclosure persistent earnings
different ways to increase sensitivity of net income
|
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when lower level managers detect and report shirking of the managers above them to get ahead
What is internal monitoring
|
it depends on current year performance and it creates incentive to maximize the current year's levels of earnings and ROE
What does short-term and mid-term incentive award depend on and what incentive does it create
|
it influence the length of the manager's decision horizon
What influence does coexistence have on the compensation plan
|
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