Question 1

Problems with stock options include all EXCEPT:

Accepted Answer

A)  A CEO might forego increasing dividends to use the cash to try and increase the stock price.
B)  CEOs accept riskier projects because that usually causes the stock price to increase.
C)  Option payoffs are closely related to the performance of the overall stock market.
D)  CEOs will work hard to increase the stock price when they receive stock options.
E)  There are no problems with using stock options to incent CEOs.F) A) and C)
G) A) and E)

Question 2

Why might a firm's Board re-price the executive stock options?

Accepted Answer

A)  To demonstrate forgiveness.
B)  To keep executives with the firm.
C)  To improve the stock price by getting more shares into the market.
D)  To make the owner's profit bigger after an important accomplishment.
E)  Firms do not re-price executive stock options.F) A) and B)
G) C) and E)

Question 3

Which country offers the largest portion of executive pay as variable incentive)  pay?

Accepted Answer

A)  United States
B)  Spain
C)  India
D)  Sweden
E)  NarniaF) C) and E)
G) A) and E)

Question 4

The character of the CEO is really what drives the basis for their pay.

Accepted Answer

A) True 
 B)False

Question 5

Xerox admitted to the SEC that it had improperly recorded earnings and agreed to pay a $10 million fine

Accepted Answer

A) True 
 B)False

Question 6

Performance stock is common stock of the company given to the executives only if certain performance criteria are met.

Accepted Answer

A) True 
 B)False  True

Question 7

Regarding the stock market, one problem with using stock options as incentives is:

Accepted Answer

A)  The transaction costs for CEOs to sell their options are relatively high.
B)  CEOs are only allowed to exercise their options when the stock price of the company is equal to the strike price.
C)  Executives only have partial influence on their firm's stock price.
D)  Typically, stock options expire after 2 years and therefore are short-term incentives.
E)  There are no problems with using stock options to incent executives.F) A) and B)
G) B) and D)

Question 8

The base salary of a CEO is solely based on characteristics of the CEO e.g.age, experience).

Accepted Answer

A) True 
 B)False  False

Question 9

If the stock price is underwater, options lose their effectiveness to motivate a CEO.

Accepted Answer

A) True 
 B)False  True

Question 10

Restricted stock usually requires a certain amount of time to pass before becoming unrestricted.

Accepted Answer

A) True 
 B)False

Question 11

When must a CEO repay their loans from their corporation?

Accepted Answer

A)  Within one year.
B)  When they achieve a goal.
C)  They often never do.
D)  Upon retirement.
E)  Upon being fired.F) All of the above
G) B) and C)

Question 12

Typically, on which accounting profit measures are cash bonuses for CEO's based on?

Accepted Answer

A)  Earnings per share.
B)  Earnings before interest and taxes.
C)  Economic value added.
D)  All of the above.
E)  None of the above.F) C) and E)
G) B) and E)

Question 13

Beyond incentives and monitoring, what could be a third way to align managers' behavior with shareholders interests?

Accepted Answer

A)  Develop strong industry standards for executives' work ethics.
B)  Increase penalties for managers who intentionally mislead shareholders.
C)  Consult all shareholders on the operational decisions of executives.
D)  Ask managers to behave more like shareholders.
E)  None of the above.There is no third way.F) B) and D)
G) B) and C)

Question 14

If a manager receives incentives, then the company will perform well.

Accepted Answer

A) True 
 B)False

Question 15

One advantage of awarding bonuses as opposed to giving raises, is that bonuses are one time rewards for realized performance.

Accepted Answer

A) True 
 B)False

Exam 2: Executive Incentives

Problems with stock options include all EXCEPT:

Correct Answer
verified

Why might a firm's Board re-price the executive stock options?

Correct Answer
verified

Which country offers the largest portion of executive pay as variable incentive) pay?

Correct Answer
verified

The character of the CEO is really what drives the basis for their pay.

Correct Answer
verified

Xerox admitted to the SEC that it had improperly recorded earnings and agreed to pay a $10 million fine

Correct Answer
verified

Performance stock is common stock of the company given to the executives only if certain performance criteria are met.

Correct Answer
verified
True

Regarding the stock market, one problem with using stock options as incentives is:

Correct Answer
verified

The base salary of a CEO is solely based on characteristics of the CEO e.g.age, experience).

Correct Answer
verified
False

If the stock price is underwater, options lose their effectiveness to motivate a CEO.

Correct Answer
verified
True

Restricted stock usually requires a certain amount of time to pass before becoming unrestricted.

Correct Answer
verified

When must a CEO repay their loans from their corporation?

Correct Answer
verified

Typically, on which accounting profit measures are cash bonuses for CEO's based on?

Correct Answer
verified

Beyond incentives and monitoring, what could be a third way to align managers' behavior with shareholders interests?

Correct Answer
verified

If a manager receives incentives, then the company will perform well.

Correct Answer
verified

One advantage of awarding bonuses as opposed to giving raises, is that bonuses are one time rewards for realized performance.

Correct Answer
verified

Exam 2: Executive Incentives

Problems with stock options include all EXCEPT:

Correct AnswerverifiedShow Answer

Why might a firm's Board re-price the executive stock options?

Correct AnswerverifiedShow Answer

Which country offers the largest portion of executive pay as variable incentive) pay?

Correct AnswerverifiedShow Answer

The character of the CEO is really what drives the basis for their pay.

Correct AnswerverifiedShow Answer

Xerox admitted to the SEC that it had improperly recorded earnings and agreed to pay a $10 million fine

Correct AnswerverifiedShow Answer

Performance stock is common stock of the company given to the executives only if certain performance criteria are met.

Correct AnswerverifiedTrue

Regarding the stock market, one problem with using stock options as incentives is:

Correct AnswerverifiedShow Answer

The base salary of a CEO is solely based on characteristics of the CEO e.g.age, experience).

Correct AnswerverifiedFalse

If the stock price is underwater, options lose their effectiveness to motivate a CEO.

Correct AnswerverifiedTrue

Restricted stock usually requires a certain amount of time to pass before becoming unrestricted.

Correct AnswerverifiedShow Answer

When must a CEO repay their loans from their corporation?

Correct AnswerverifiedShow Answer

Typically, on which accounting profit measures are cash bonuses for CEO's based on?

Correct AnswerverifiedShow Answer

Beyond incentives and monitoring, what could be a third way to align managers' behavior with shareholders interests?

Correct AnswerverifiedShow Answer

If a manager receives incentives, then the company will perform well.

Correct AnswerverifiedShow Answer

One advantage of awarding bonuses as opposed to giving raises, is that bonuses are one time rewards for realized performance.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified
True

Correct Answer
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Correct Answer
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False

Correct Answer
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True

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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