Factors when setting the ceos compensation
Managerial Accounting
Suppose you were a member of Company X’s board of directors and chairman 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?
