a.
To discuss: The advantages and disadvantages of compensating a manager with a fixed salary in a scenario of conflict between managers and shareholders.
Introduction:
Agency relationship: Agency relationship is the bonding between the principal and the agent. It occurs when an individual, group or firm (called as principal) hires a person (called agent) to provide certain services that are required by the principal. To complete the work efficiently, the principal delegates the decision-making power to the agents. Owners-managers; Shareholders/ stockholders- managers and stockholders- creditors are some of the popular agency relationships.
b.
To discuss: The advantages and disadvantages of compensating a manager with stock in the firm which has to be held for five years in a scenario of conflict between managers and shareholders.
Introduction:
Agency relationship: Agency relationship is the bonding between the principal and the agent. It occurs when an individual, group or firm (called as principal) hires a person (called agent) to provide certain services that are required by the principal. To complete the work efficiently, the principal delegates the decision-making power to the agents. Owners-managers; Shareholders/ stockholders- managers and stockholders- creditors are some of the popular agency relationships.
c.
To discuss: The advantages and disadvantages of compensating a manager with a salary linked to a firm’s profit.
Introduction:
Agency relationship: Agency relationship is the bonding between the principal and the agent. It occurs when an individual, group or firm (called as principal) hires a person (called agent) to provide certain services that are required by the principal. To complete the work efficiently, the principal delegates the decision-making power to the agents. Owners-managers; Shareholders/ stockholders- managers and stockholders- creditors are some of the popular agency relationships.
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Check out a sample textbook solution- 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…arrow_forwardSuppose 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?arrow_forwardSometimes 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.arrow_forward
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