Suppose you were a member of Company X’s board of directors and chairperson of the company’s compensation committee. What factors should your committee consider when setting the CEO’s compensation? Should the compensation consist of a dollar salary, stock options that depend on the firm’s performance, or a mix of the two? If “performance” is to be considered, how should it be measured? Think of both theoretical and practical (that is, measurement) considerations. If you were also a vice president of Company X, might your actions be different than if you were the CEO of some other company?

Contemporary Auditing
11th Edition
ISBN:9781337650380
Author:KNAPP
Publisher:KNAPP
Chapter4: Ethical Responsibilities Of Accountants
Section4.8: Dell Inc.
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Suppose you were a member of Company X’s board of directors and chairperson
of the company’s compensation committee. What factors should your committee
consider when setting the CEO’s compensation? Should the compensation consist
of a dollar salary, stock options that depend on the firm’s performance, or a mix
of the two? If “performance” is to be considered, how should it be measured?
Think of both theoretical and practical (that is, measurement) considerations. If
you were also a vice president of Company X, might your actions be different
than if you were the CEO of some other company?

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