Chapter 7: Remuneration policies Flashcards
1
Q
Shareholder value view
A
contracts are chosen to maximize value for shareholders
aligning managers’ interests with those of shareholders
executive pay is decided directly by shareholders
2
Q
Rent extraction view
A
contracts are set by executives themselves to maximize their own rents
3
Q
Pay is shaped by institutional forces :
A
- Legislation and taxation
- Accounting
- Compensation consultants
- Proxy advisory firms
4
Q
Proxy advisors supply voting recommendations to institutional advisors on how to vote their shares on executive pay :
A
Say-on-pay
5
Q
compensation packages are approved by who ?
A
a vote of the independent directors of the full board
6
Q
fundamental objectives of the remuneration policy :
A
- Aligning the interests
- incentivize the company’s performance over the long term
- retain the best professionals
7
Q
three issues when designing the compensation package
A
- Design of conditions (aligned company’s strategy)
- Amount
- Disclosure (annual reports, general meeting of shareholders)
8
Q
T/F: Shareholders want corporations to ‘explain’ information rather than ‘disclose’ it.
A
TRUE (case Disney)
9
Q
A
