Executive Compensation

Executive compensation Perfectly efficient labour commercialise: if managers were to execute badly, they lead be sacked and the external labour market impart be aware at the end of the twenty-four hours and he wont get a line of credit and even if he did, he will only collar a low pay. (Reputation damaged) Less than efficient labour market: the poor performance of the manager will not be revealed totally the price of the share market thereof will not be fully punished. As a egress IT DOESNT ADDRESS THE MORAL HARARD problem need to build a contract to motivate him to work hard Efforts : 2 types terse marches: through the use of the pecuniary figures that will forge at the end of the financial year. E.g. cost cutting Long term: more apprize adding and as a import basist see the result IMMEDIATELY, require a end of time to see the end result. E.g. R&D Acctg measures and S.P measures twain address different issue. The collaboration of the 2 will result in most efficient contracts. Acctg measures| Share price| predisposition - Low [Historic cost] * It uses past evidence and financial numbers, those that are report in the FS. * E.g. the cost of R&D will be shown in the IS but as an EXPENSE hence the profit will decrease as a result.

R&D doesnt constitute the rise in income immediately (recognition lag) as It requires a period of time forrader it will be realized. E.g. new product that could lead to high efficiency in fuel consumption in cars.Sensitivity higher(prenominal) [ attractive nurse cost] * Firm using fair value help to relate the R&D value through the use of market values * If there isnt a market for it, it might not help in making it more relevantPrecision High [Historic cost] * Make use of financial numbers that are not really subjected to manipulation * slight noise * Doesnt get affected by sparing wide factors that is unrelated to the managers effortPrecision low [ Fair value] * Using fair value though relevant, not punctilious as it is subjected to changes and... If you want to get a full essay, put it on our website: Orderessay

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