When Executive Pay Is Linked Closely to the Firm's Performance

question 28

True/False

When executive pay is linked closely to the firm's performance it is not possible for executives' pay to increase when the company's share price is falling.

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Definitions:

Equivalent Annual Payment Bond

A type of bond that pays annual interest payments, calculated to provide a return equivalent to other periodic payment schedules.

EAR

Effective Annual Rate, a measure of interest that takes into account the effects of compounding over a year.

Conversion Value

The financial worth of converting a convertible security, like a bond, into a set number of shares of the issuing company.

U.S. Treasury Note

A marketable U.S. government debt security with a fixed interest rate and a maturity between one and ten years.