Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
Essentials of Corporate Finance (Mcgraw-hill/Irwin Series in Finance, Insurance, and Real Estate)
9th Edition
ISBN: 9781259277214
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 1, Problem 1.14CTCR
Summary Introduction

To think critically about: Whether the compensation to the top managers is higher.

Introduction:

The managers will often have an important economic incentive to maximize the value of shares. Commonly, the first incentive is that the managerial compensation is often tied to the financial performance in common to offer share value.

The second incentive the managers relate to the prospects of the job is to promote the top performers in the firm.

Statement:

Person MF, a Chief Executive Officer in Company MG earned $89 million in the year 2014.

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Students have asked these similar questions
The issue of the size of executive compensation packages is explored in the text. The highest paid CEO in 2014 was David Zaslav, the CEO of Discovery Communications, whose total executive compensation package was $156.1 million, the vast majority of which was from stock awards. Critics claim that CEOs receive excessive executive compensation packages when compared with the average worker. Consider that NBA basketball star LeBron James took in $64.8 million in 2014, the majority of which was from endorsements, while radio and TV entertainer Howard Stern earned $95 million? Are the top paid corporate executives overpaid when compared to top entertainers? Why or why not?
Many financial managers and corporate officers are often criticized for (a) poor decisions, (b) lack of ethical behavior, (c) large salaries, (d) lucrative severance packagesworth millions of dollars, and (e) extravagant lifestyles. Is this criticism justified? Justify your opinion.
Consider again Milton Friedman’s article. 1. What does Friedman mean by “ethical custom”? 2. If the laws of the society are limiting the company’s profitability, would the company be within its rights to disobey the law? 3. What if the law is “on the books,” but the company could count on a lack of enforcement from state officials who were overworked and underpaid? Should the company limit its profits? Suppose that it could save money by discharging a pollutant into a nearby river, adversely affecting fish and, potentially, drinking water supplies for downstream municipalities. In polluting against laws that aren’t enforced, is it still acting “within the rules of the game”? What if almost all other companies in the industry were saving money by doing similar acts?
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