Discuss the advantages and disadvantages of the following forms of managerial compensation in terms of mitigating agency problems, that is, potential conflicts of interest between managers and shareholders.a. A fixed salary.b. Stock in the firm that must be held for five years.c. A salary linked to the firm’s profits.
Q: You are employed as a Chartered Certified Accountant in an insurance company. You are completing…
A: When you are thinking of business than you should consider present earnings from salary and if you…
Q: Which among the following statements is INCORRECT regarding agency costs? a. The reason for agency…
A: Agency problems exist when there is a conflict of interest between the management and the…
Q: The following questions are about corporate governance and executive compensation: (a) How does…
A: The ethics is a branch of philosophy that describes regulation, protecting, and suggesting the right…
Q: Preventing Job Withdrawal Preventing highly valuable employees from leaving is an important…
A: The aim of any organization will be to increase the profitability of the company. The profitability…
Q: Which of the following actions would be likely to reduce potential conflicts of interest between…
A: option C is correct The composition of the board of directors is changed from all inside directors…
Q: Suppose you were a member of Company A’s board of directors and chairperson of the company’s…
A: Compensation Package: The compensation package of the manager should be attractive which inspire…
Q: Several managers in your company are experiencingpersonal financial problems and have asked that…
A: Last-in-First-Out (LIFO): In this method, items purchased recently are sold first. So, the value of…
Q: Assume you are the financial director of a public company which has been experiencing a decline in…
A: Corporate Governance is a mechanism that has been introduced to modify the type of control to be…
Q: What is one of the ways that accounting is used to direct and control the manager of a corporation?…
A: Accounting is referred to as a process under which the transactions of a company are recorded,…
Q: c) In 2019, Zain Oil company was being sued for damages the seaside because its chemical material…
A: Qualitative qualities, according to the framework, are the features that fulfill the decision…
Q: est the best communication channels for the following messages. Assume that all channels are…
A:
Q: Chief executive officer compensation can be a material amount andis often scrutinized by regulators,…
A: “Since you have posted a question with multiple sub-parts, we will solve the first three subparts…
Q: The staffing service cycle of a company involves events and activities related to the compensation…
A: Auditing in Employees Payroll It is essential for the company to conduct the auditing in the…
Q: the firm is facing A. a labor union. B. a major investment. C. time or resource constraints. D. the…
A: “Since you have asked multiple questions, we will solve the one question for you. If you want any…
Q: Suppose you were a member of Company X’s board of directors and chairman of the company’s…
A:
Q: Which one of the following is a principle that a successful wage incentive scheme should adhere to?…
A:
Q: which of the following could be a potential solution to the agency problem between managers and…
A: Giving the managers a part of the company through stock-based compensation could be a potential…
Q: Preventing Job Withdrawal Preventing highly valuable employees from leaving is an important…
A:
Q: A positive-balance employer has: a. an employee development program that promotes work-life…
A: Answer: Option b
Q: Identify and discuss the non-financial factors that may affect a client’s decision to reduce…
A: Wage is a payment that an employee receives for their work. Wages are mainly paid on a daily and…
Q: Why might a manager focused solely on accounting numbers miss opportunities for future benefits?
A: The accounting manager oversees the accountant. Create systems and processes for analyzing and…
Q: ow would the principle that directors may be linked to the performance affect the company's…
A: Performance of the company means the company's working, which is analyzed by its working, financial…
Q: Explain several dimensions of the shareholder-principal conflict with manager agents known as the…
A: answer are follows
Q: You are employed as a Chartered Certified Accountant in an insurance company. You are completing…
A: Opportunity cost means the profit forgo of next best alternative. Sunk cost is a cost which is…
Q: Which organization would likely be most interested in whether the company has the ability to pay…
A: The question is related to organization would likely be most interested in whether the company has…
Q: Which of the following is not likely to be included in thetypical components of management…
A: It is an amount paid by the employer to his employees for the work they do in accordance with…
Q: Bonus plan are used to reduce agency problems that exist between managers and shareholders. Discuss…
A: Agency Problem: A conflict of interest exists in any connection in which one person is expected to…
Q: CEO compensation design is effective in controlling the behavior in their decision making. How a…
A: The investment decision in the company implies investing funds in the long-term and the short-term…
Q: how do compensation plans, including bonus structures, drive behavior?
A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: 23. Ethical challenges for management accountants include:( A.Whether to accept gifts from…
A: Solution Note : Dear student as per the Q&A guideline we are required to answer the first…
Q: Identify the applicable qualitative characteristics referred to in the Conceptual Framework for…
A: Facts in the given question are mentioned below: Profits are based on Director's Bonuses. Their…
Q: Which of the following methods would be most likely to decrease the agency problems by helping…
A: Agency problem takes place because there is no sync in the goals of shareholders and managers.…
Q: Suppose you were a member of Company X’s board of directors and chairperson of the company’s…
A: Answer: Any firm’s primary goal is to increase the wealth of shareholders. Maximizing shareholders…
Q: Preventing Job Withdrawal Preventing highly valuable employees from leaving is an important…
A: Please find the answer to the above question below:
Q: Preventing Job Withdrawal Preventing highly valuable employees from leaving is an important…
A: Please find the answer to the above question below:
Q: Imagine that you are a manager in a large entity and need to make a recommendation to the CEO on…
A: The Ethical Issues that should be considered are: Independence Conflict of interest Objectivity…
Q: As a manager, would you use financial incentives to compensate your employees? If so, what would be…
A: Financial incentive: Financial incentives are given with the intention of motivating employees. The…
Discuss the advantages and disadvantages of the following forms of managerial compensation in terms of mitigating agency problems, that is, potential conflicts of interest between managers and shareholders.
a. A fixed salary.
b. Stock in the firm that must be held for five years.
c. A salary linked to the firm’s profits.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
- ABC Ltd has incorporated a bonus plan that rewards the board of directors (executive members) by providinga bonus of 3 percent of reported profits. This is an Accounting-based incentive that has the advantage whichthe accounting results may be based on subunit or divisional performance."A well-informed labour market will motivate management to work to maximize the value of its firm.Underperformance might lead to dismissal and, if the labor market is efficient in disseminating data, a 'failed'the manager might have difficulty attracting a position with comparable pay elsewhere." (Deegan, 2020)Requirement:1) Using Positive Accounting Theory (PAT), discuss the bonus theme in general and why the bonus plan(Accounting-based) was put in place in ABC Ltd? Please provide references for my study. Thing to include in answer: Demonstrate superiorknowledge of the theory andkey concepts. Excellentinterpretation with extensiveelaboration of relevant subtopics, appropriatelyweighted and within…ABC Ltd has incorporated a bonus plan that rewards the board of directors (executive members) by providinga bonus of 3 percent of reported profits. This is an Accounting-based incentive that has the advantage whichthe accounting results may be based on subunit or divisional performance."A well-informed labour market will motivate management to work to maximize the value of its firm.Underperformance might lead to dismissal and, if the labor market is efficient in disseminating data, a 'failed'the manager might have difficulty attracting a position with comparable pay elsewhere." (Deegan, 2020)Requirement:1) Using Positive Accounting Theory (PAT), discuss the bonus theme in general and why the bonus plan(Accounting-based) was put in place in ABC Ltd? Please provide references for my study.ABC Ltd has incorporated a bonus plan that rewards the board of directors (executive members) by providinga bonus of 3 percent of reported profits. This is an Accounting-based incentive that has the advantage whichthe accounting results may be based on subunit or divisional performance."A well-informed labour market will motivate management to work to maximize the value of its firm.Underperformance might lead to dismissal and, if the labor market is efficient in disseminating data, a 'failed'the manager might have difficulty attracting a position with comparable pay elsewhere." (Deegan, 2020)Requirement:1) Using Positive Accounting Theory (PAT), discuss the bonus theme in general and why the bonus plan(Accounting-based) was put in place in ABC Ltd? Please provide Harvard reference (800 words) Thing to include in answer: Demonstrate superiorknowledge of the theory andkey concepts. Excellentinterpretation with extensiveelaboration of relevant subtopics, appropriatelyweighted and within…
- Which of the following is not likely to be included in thetypical components of management compensation?a. Company stock options.b. Cash bonuses.c. Free meals.d. Fixed salary.e. Company stock.Sometimes compensation packages include bonuses designed to provide performance incentives to employees. The difficulty a bonus can cause accountants is not an accounting problem, but a math problem. The complication is that the bonus formula sometimes specifies that the calculation of the bonus is based in part on the bonus itself. This occurs anytime the bonus is a percentage of income because expenses are components of income, and the bonus is an expense. Regalia Fashions has an incentive compensation plan through which a division manager receives a bonus equal to 15% of the division’s net income. Division income in 2024 before the bonus and income tax was $250,000. The tax rate is 30%. Calculate the amount of the bonus. Prepare the adjusting entry to record the bonus compensation. Bonus arrangements take many forms. Suppose the bonus specifies that the bonus is 10% of the division’s income before tax, but after the bonus itself. Calculate the amount of the bonus.Suppose you were a member of Company A’s board of directors and chairperson of the company’s compensation committee. What factors should your committee consider when setting the CEO’s compensation? Should the compensation consist of a dollar salary, stock options that depend on the firm’s performance, or a mix of the two? If “performance” is to be considered, how should it be measured? Think of both theoretical and practical (that is, measurement) considerations. If you were also a vice president of Company A, might your actions be different than if you were the CEO of some other company?
- Company A pays its managers a fixed cash salary. Company B adds ‘Short Term Incentives’ which involve extra cash payments linked to profits. Company C pays part of the compensation in company shares. Which Company’s compensation is most likely to mitigate conflicts of interest between managers and shareholders?ABC Ltd has incorporated a bonus plan that rewards the board of directors (executive members) by providinga bonus of 3 percent of reported profits. This is an Accounting-based incentive that has the advantage whichthe accounting results may be based on subunit or divisional performance."A well-informed labour market will motivate management to work to maximize the value of its firm.Underperformance might lead to dismissal and, if the labour market is efficient in disseminating data, a 'failed'a manager might have difficulty attracting a position with comparable pay elsewhere." (Deegan, 2020)Requirement:1) Using Positive Accounting Theory (PAT), discuss the bonus theme in general and why the bonus plan(Accounting-based) was put in place in ABC Ltd?2) Explain whether the board of directors could be motivated to try to inflate reported profits.3) Use the opportunistic perspective of PAT to explain the potential for managers to manipulatecorporate disclosure.Sometimes compensation packages include bonuses designed to provide performance incentives to employees. The difficulty a bonus can cause accountants is not an accounting problem, but a math problem. The complication is that the bonus formula sometimes specifies that the calculation of the bonus is based in part on the bonus itself. This occurs anytime the bonus is a percentage of income because expenses are components of income, and the bonus is an expense. Regalia Fashions has an incentive compensation plan through which a division manager receives a bonus equal to 10% of the division’s net income. Division income in 2016 before the bonus and income tax was $150,000. The tax rate is 30%. Required: 1. Express the bonus formula as one or more algebraic equation(s). * 2. Using these formulas calculate the amount of the bonus. 3. Prepare the adjusting entry to record the bonus compensation. 4. Bonus arrangements take many forms. Suppose the bonus specifies that the bonus is 10% of the…
- The controller of one division of a large diversified firm is compensated by salary plus bonus. The bonus is a significant part of total compensation, and is based directly on the profits of the division. Thus, the controller has an incentive to find ways to increase profits, including the delay of discretionary expenses such as research and development, delay of maintenance and repair of manufacturing equipment, and delay of sales promotions. Required: Is finding ways to increase profits as described above unethical? Why or why not? Who is to blame if anyone?Sometimes compensation packages include bonuses designed to provide performance incentives to employees.The difficulty a bonus can cause accountants is not an accounting problem, but a math problem. The complication is that the bonus formula sometimes specifies that the calculation of the bonus is based in part on the bonusitself. This occurs any time the bonus is a percentage of income because expenses are components of income,and the bonus is an expense.Regalia Fashions has an incentive compensation plan through which a division manager receives a bonus equalto 10% of the division’s net income. Division income in 2018 before the bonus and income tax was $150,000. Thetax rate is 30%.Required:1. Express the bonus formula as one or more algebraic equation(s).342. Using these formulas, calculate the amount of the bonus.3. Prepare the adjusting entry to record the bonus compensation.4. Bonus arrangements take many forms. Suppose the bonus specifies that the bonus is 10% of the…Suppose you were a member of Company X’s board of directors and chairman of the company’s compensation committee. What factors should your committee consider when setting the CEO’s compensation? Should the compensation consist of a dollar salary, stock options that depend on the firm’s performance, or a mix of the two? 3.If “performance” is to be considered, how should it be measured? Think of both theoretical and practical (that is, measurement) considerations.
