Compensation at Nonpublic Companies The executive compensation programs of thelargest public companies often include the types of equity-based compensation such as stockoptions and performance shares described in this chapter. Smaller nonpublic companies oftenhave the same types of strategic goals and want to provide the same types of compensationplans but do not have the equity types of compensation to offer because they do not have publicly traded stock.Required:1. What is the primary advantage of equity-based compensation such as stock options and performanceshares?a. It is easier to administer than flat salary or performance-based cash payments.b. Short-term stock prices cannot be influenced inappropriately by executives.c. It aligns managers’ incentives (to increase value) with those of the shareholders.d. It is more consistent with generally accepted accounting procedures than other forms of compensation.2. What types of compensation can nonpublic companies offer that would provide incentives similar tothose offered by equity-based compensation?
Dividend Policy
A dividend is a part of the profit paid to the shareholder in an organization. The management of the organization has the right to decide the policy for giving a dividend from the earnings to the shareholder. However, an organization is not in the obligation to declare a dividend for the investor. Dividend policy differs from organization to organization. As the management has the only authority to decide dividend rate, dividend amount, and time of dividend payout by considering all other elements that create an impact on the payment of a dividend.
Stocks And Dividends
Stock or equities are generally sold and bought in the Stock Exchange or which is popularly known as the stock market. Stocks are issued in the Stock Exchange for the sole purpose of raising funds for the Corporation or the company itself. Now since an individual has purchased a portion of the Corporation or company, he or she may claim to be a part of the earnings or profit of the company.
Compensation at Nonpublic Companies The executive compensation programs of the
largest public companies often include the types of equity-based compensation such as stock
options and performance shares described in this chapter. Smaller nonpublic companies often
have the same types of strategic goals and want to provide the same types of compensation
plans but do not have the equity types of compensation to offer because they do not have publicly traded stock.
Required:
1. What is the primary advantage of equity-based compensation such as stock options and performance
shares?
a. It is easier to administer than flat salary or performance-based cash payments.
b. Short-term stock prices cannot be influenced inappropriately by executives.
c. It aligns managers’ incentives (to increase value) with those of the shareholders.
d. It is more consistent with generally accepted accounting procedures than other forms of compensation.
2. What types of compensation can nonpublic companies offer that would provide incentives similar to
those offered by equity-based compensation?
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
