ACC 406 Lecture Notes - Lecture 11: Balanced Scorecard, Risk Aversion, Business Valuation
16 Dec 2017
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Chapter 20 (management compensation, business analysis, and business valuation) Management compensation plans: policies and procedures for compensating managers. Bonus: incentive received based on the achievement of performance goals for a period. Benefits: extra privileges paid for by the firm. Lo 20-2 strategic role and objectives of management compensation. *strategic role of management compensation has three aspects: strategic conditions facing the firm, effect of risk aversion on manager"s decision making, certain ethical issues. Design the compensation plan for existing strategic conditions. Top management should consider the specific strategic conditions facing the firm as a basic consideration in developing the compensation plan and making changes as strategic conditions change. Make decisions that have more certain outcomes. There is a common concern that executive pay is too high and that lower-level employees are not properly compensated relative to the very high salaries and bonuses of top executives especially during times of downsizing and layoffs.
