财务会计理论(司可脱)ppt文件10_scott_im_ch10

2006 Pearson Education Canada Inc.,10-1,CHAPTER 10Executive Compensation, 2006 Pearson Education Canada Inc.,10-2,Reporting On Manager Performance,A Second Major Role For Financial Reporting, 2006 Pearson Education Canada Inc.,10-3,Two Aspects of Reporting On Manager Performance,Enable the Managerial Labour Market to Properly Value Manager Performance and ReputationProvide a Performance Measure for Managerial Incentive Contracts, 2006 Pearson Education Canada Inc.,10-4,Manager “Effort”,Manager Effort Really a Set of ActivitiesPartition the Set Into Short-Run and Long-Run Decision Horizon ActivitiesShort-run activities exampleCost controlLong-run activities examplesR&D, planning, capital expenditures, 2006 Pearson Education Canada Inc.,10-5,Desirable Property of a Managerial Performance Measure,Highly Informative about Manager Effort (stewardship)Informativeness depends onPrecision of the performance measureSensitivity of the performance measure, 2006 Pearson Education Canada Inc.,10-6,Net Income as a Performance Measure,Sensitivity of Net IncomeHistorical cost-based net income “waits” until many aspects of manager effort are realized (recognition lag)R&D, advertisingCapital expenditure programsMay encourage a short-run decision horizonMay be managedReduces sensitivity by disguising shirking, 2006 Pearson Education Canada Inc.,10-7,Net Income as a Performance Measure, Contd.,Impact of fair value accounting on sensitivityIncreases sensitivity by reducing recognition lag, 2006 Pearson Education Canada Inc.,10-8,Net Income as a Performance Measure, Contd.,Precision of Historical Cost-based Net IncomeRelatively unaffected by economy-wide and other events that are uninformative about manager effort, 2006 Pearson Education Canada Inc.,10-9,Net Income as a Performance Measure, Concl.,Impact of Fair Value Accounting on Precision of Net IncomeLess precise than historical cost-based net income since more subject to economy-wide factorsIf Reduction of Precision Outweighs Increase in SensitivityHistorical-cost based net income may be more informative, 2006 Pearson Education Canada Inc.,10-10,Share Price As a Performance Measure,Sensitivity of Share PriceReflects manager effort “sooner” (less recognition lag)Efficient market recognizes expected economic effects of manager effort without waiting for realizationR&D, advertisingCapital expenditure programsMay encourage long-run decision horizon, 2006 Pearson Education Canada Inc.,10-11,Share Price As a Performance Measure, Contd,Precision of Share PriceMore volatile than net incomeImpacted by economy-wide events, reducing informativeness about effortInterest rate changesderegulationbooms, recessionsLess ability to manage, 2006 Pearson Education Canada Inc.,10-12,Share Price v. Net Income As Performance Measures,Conclude:Net income (historical cost-based) relatively precise but low in sensitivityShare price relatively sensitive but low in precision, 2006 Pearson Education Canada Inc.,10-13,Share Price v. Net Income As Performance Measures, Contd.,Not a Question of Either/OrHolmstrm (1979) suggests use bothCan control managers decision horizon by the proportion of net income to share price in the incentive contract (Bushman & Indjejikian, 1992)More net income shorter horizon, and vice versa, 2006 Pearson Education Canada Inc.,10-14,How Can Accountants Increase Role of Net Income In Incentive Plans?,Fair Value Accounting?Intangibles (goodwill)ESOsFull DisclosureEnables compensation committee to evaluate earnings persistence, 2006 Pearson Education Canada Inc.,10-15,The BCE Compensation Plan,SalaryShort-Term Incentive AwardsShare units or cash bonus, based on Attainment of strategic objectives, e.g. market share, customer satisfactionAttainment of financial targets, e.g., EPSIndividual creativity and initiative, e.g., succession planning, management developmentNote that the more senior the manager, the more compensation depends on performance. Why?, 2006 Pearson Education Canada Inc.,10-16,The BCE Compensation Plan, Contd.,ESOsPromote longer-term manager incentivesValue to manager based on share price performanceAwarded to bring total compensation up to that of comparable companiesESOs voluntarily expensed in 2003, 2006 Pearson Education Canada Inc.,10-17,The BCE Compensation Plan, Concl.,2004 Revisions to Compensation PlanReduce ESOs by 50%. Why?Shorten decision horizon. Why?Shorten ESO time to expiryMid-term compensation planRestricted share units, 2006 Pearson Education Canada Inc.,10-18,Role of Risk,Too Little RiskReduces effort incentiveToo much riskManager avoids risky projectsExcessive hedgingControlling RiskRelative Performance EvaluationFine in theory, but hard to find in practiceRole of Board, compensation committee, 2006 Pearson Education Canada Inc.,10-19,Empirical Compensation Research,Lambert & Larcker (1987)Cash compensation (salary + bonus) more highly correlated with ROE than with return on sharesCorrelation higher as noise in NI lowerCorrelation lower for growth firmsHigher weight on ROE in compensation plan when correlation between ROE and return on shares low, and vice versa, 2006 Pearson Education Canada Inc.,10-20,The Politics Of Executive Compensation,Is Executive