Chapter 20 - Management compensation, business analysis, and business valuation. After studying this chapter you should be able to: Identify and explain the types of management compensation; identify the strategic role of management compensation and the different types of compensation used in practice; explain the three characteristics of a bonus plan: the base for determining performance, the compensation pool from which the bonus is funded, and the bonus payment options; | Management Compensation, Business Analysis, and Business Valuation Chapter Twenty McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. 20-2 Identify and explain the types of management compensation Identify the strategic role of management compensation and the different types of compensation used in practice Explain the three characteristics of a bonus plan: the base for determining performance, the compensation pool from which the bonus is funded, and the bonus payment options Learning Objectives 20-3 Learning Objectives (continued) Describe the role of tax planning and financial reporting in management compensation planning Apply different methods for business analysis and business valuation 20-4 Management Compensation Recruiting, motivating, rewarding, and retaining effective managers is critical to the success of all firms Management compensation = policies and procedures for compensating managers; they include one or more of the following: A fixed payment (called salary) A bonus (based on the achievement of performance goals for the period) Benefits (also referred to as perks, such as travel, membership in a fitness club, medical benefits, and other extras paid for by the firm) 20-5 The Strategic Role of Management Compensation 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 Top management can manage risk aversion effectively by carefully choosing the mix of salary and bonus in total compensation There is concern that executive pay is high compared to that of lower-level employees 20-6 Management Compensation and the Sales Life Cycle Sales Life Cycle Phase Salary Bonus Benefits Product Introduction High Low Low Growth Low High Competitive Maturity Competitive Competitive Competitive Decline High Low Competitive 20-7 The Objectives of Management Compensation . are consistent . | Management Compensation, Business Analysis, and Business Valuation Chapter Twenty McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. 20-2 Identify and explain the types of management compensation Identify the strategic role of management compensation and the different types of compensation used in practice Explain the three characteristics of a bonus plan: the base for determining performance, the compensation pool from which the bonus is funded, and the bonus payment options Learning Objectives 20-3 Learning Objectives (continued) Describe the role of tax planning and financial reporting in management compensation planning Apply different methods for business analysis and business valuation 20-4 Management Compensation Recruiting, motivating, rewarding, and retaining effective managers is critical to the success of all firms Management compensation = policies and procedures for compensating managers; they include one or more of the following: A
