Oracle cut the expiration date of its stock option grants from 10 years to 5. Why? What does this do to the value of the options? Why is the value affected in this way?
Are CEOs worth their pay? How would you devise a test to determine an answer to the question? Who will be helped by the new SEC disclosure rule on executive pay? How will they be helped?
Should employees be forced to give back bonuses if their firm’s financial reporting had errors, which allowed the bonuses to be paid? Why or why not? If so, which employees?
What do you think is the purpose of requiring firms to disclose how their executive pay packages relate to firm performance? Do you think that these disclosures will produce the desired outcome? Should these disclosures be part of the audit?
In your opinion, how much equity should be included in executive compensation packages? How would you determine an appropriate amount?
How would you have voted on Chipotle’s executive compensation pay plan? Is $25 million for the CEO “too much”? How would you decide if pay is excessive?
What is your opinion about Walmart’s use of non-GAAP measures in deciding whether or not bonuses are paid?
In your opinion, is the use of non-GAAP measures in an IPO misleading? Or, is it truly helpful? If the latter, do you think GAAP is deficient? Should, for example, the measure of “free cash flow” be standardized by the FASB if it is deemed relevant for investor decisions?
Would you make an investment decision based on the pay ratio of CEO pay to that of the average worker? Why or why not? Who (else) might find the pay ratio useful? Why?
Do you believe some executives are “overpaid”? How would you measure overpayment? Do you believe that proposed “pay gap” disclosures would lead to beneficial changes in pay practices? How?
So, the pay for top 200 CEOs climbed by 16% from 2011 to 2012. Why? In your opinion, what should pay packages be linked to that is different from what they are currently? Or, is the current (average) pay/performance linkage acceptable?
Shareholders in Switzerland now have the authority to approve or block proposed compensation for executives. Do you believe this is appropriate? Why or why not? What are some potential consequences of blocking compensation plans for executives? Should such authority be given to shareholders for U.S. firms? Why or why not?
Tim Cook at Apple was paid $4.2 million for the most recent year. Do you know where to find CEO compensation information? Why do you think it is publicly available? Cook’s pay is characterized as modest. Do you agree? Why or why not?
Why do you suppose that it is “news” that CEO pay is more closely aligned with firm performance? Haven’t pay packages always been designed to do precisely that? What factors have prevented this alignment of pay with performance up until now?
Using lingo from agency theory, respond to the following: “directors would often overlook missed targets and award big bonuses anyway.”
If you are the CEO, to whom are you primarily answerable: stockholders or debtholders? What is the rationale for tying your pay (as CEO) to stock prices? What would be the rationale for tying your pay (as CEO) to bond prices? Can you be answerable to both constituencies?
What is the connection between the bankers’ bonuses and estimates of fair values of certain investments?
