Richard N Ericson
The New Standards
Richard N Ericson
The New Standards
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Make the most of the new standards Every year companies spend millions of dollars on executive incentives. All too often, however, these programs provide a very weak link between pay and performance, with executives potentially rewarded as much for bad decisions as they are for good ones. Packed with examples, The New Standards insightfully discusses: * How to link pay with business results that create long-term value * Why incentive structures can discourage management from reasonable risk-taking, in some cases, and can enocourage imprudent risks in others * The full range of inputs that…mehr
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Make the most of the new standards Every year companies spend millions of dollars on executive incentives. All too often, however, these programs provide a very weak link between pay and performance, with executives potentially rewarded as much for bad decisions as they are for good ones. Packed with examples, The New Standards insightfully discusses: * How to link pay with business results that create long-term value * Why incentive structures can discourage management from reasonable risk-taking, in some cases, and can enocourage imprudent risks in others * The full range of inputs that should guide proper incentive policy * Why performance measures must reflect both the quality and quantity of earnings * Risk, executive behavior, and the cost of capital * How to use valuation criteria when choosing metrics * The pros and cons of common approaches to stock-based incentive pay Written by noted compensation expert Richard Ericson, this innovative book is a must-read for directors and management concerned with executive compensation design or financial performance measurement and forecasting. Get the guidance and concrete solutions you need to thoroughly reexamine your executive compensation policies and practices with the principles and financial maxims found in The New Standards.
Produktdetails
- Produktdetails
- Verlag: John Wiley & Sons / Wiley
- Seitenzahl: 336
- Erscheinungstermin: 19. April 2010
- Englisch
- Abmessung: 260mm x 183mm x 23mm
- Gewicht: 834g
- ISBN-13: 9780470559895
- ISBN-10: 0470559896
- Artikelnr.: 28163065
- Verlag: John Wiley & Sons / Wiley
- Seitenzahl: 336
- Erscheinungstermin: 19. April 2010
- Englisch
- Abmessung: 260mm x 183mm x 23mm
- Gewicht: 834g
- ISBN-13: 9780470559895
- ISBN-10: 0470559896
- Artikelnr.: 28163065
Richard N. Ericson is an expert in executive compensation with Towers Watson. He has more than twenty-five years of experience in business valuation, performance standard setting, incentive design, and general executive pay consulting. Mr. Ericson holds an M.B.A. in finance from the University of Chicago.
Preface. Acknowledgements. Chapter 1 To the CEO. Well-Designed Incentives
Are Governance Defined. Old School. Act Now. You Do Not Run Your Company.
The New Standards. It Is Not About You. Last Things First. Bottom Lines.
Chapter 2 Business Valuation and Incentive Policy. The Rosetta Stone.
Stealing the Playbook of Business Valuation. Incentives and Value Creation.
Value Is a Function of the Quality and Quantity of Earnings. Cost of
Capital and Expected Returns. As Long as We're at It. What Are We Paying
For? Total Business Return. The DCF Model Serves as a Proxy for Other
Valuation Methods. Free Cash Flow. FCF and the Irrelevance of Accounting
Choices. Income and Capital: FCF's Drivers Should Be the Main Incentive
Drivers. The Shape of Things to Come. Quando, Quando, Quando. The Past Is
Relevant Only as Prologue. Valuation Perspective: Operational Results,
Debt, and Capital Structure. Chapter 3 Market Practices in Incentive Pay.
How Much Are We Paying for Management Incentives? Variable Pay versus
Incentive Pay. Mismatch Makers Other Market-Based Considerations of
Market-Based Consideration. Market Practices and Presumptions. Chapter 4
The New Standards. Common Sense. Bias Is the Boll Weevil of Value Creation.
Get Cynical. Incentivization and Its Discontents. Leading Charcter.
Guidelines for Incentive Design. Chapter 5 Risk and Executive Incentive
Pay. Risk Management Policy and Incentives. Sheep in Wolves' in Clothing.
Investors versus Management. The Risk Trade. Risk and Incentive
Calibration. The Wages of Risk: Estimating the Cost of Capital. Beta
Coefficients and the Capital Asset Pricing Model. Financial Leverage and
the Cost of Capital. Other Methods and Evidence for Attaching a Cost to
Capital. Chapter 6 Motive, Means, and Method: Evaluating Incentive
Performance Metrics. Role of Individual Performance in Incentive Pay.
Nonfinancial Goals. Evaluating Financial Metrics. Revenue, Volume, and
Gross Margin. Using Valuation Criteria to Choose Metrics. Context for
Evaluating Financial Metrics. Operating Income, EBIT, and Return on
Invested Capital. Two Wrongs Can Make a Right. On the Importance of Being
Earnest. Pretax Income, Net Income, EPS, and ROE. Debt, Share Repurchases,
EPS, and Stock Price Gains. Remedying Issues with Pre-tax Income, Net
Income, EPS, and ROE. Cash Flow Metrics. Indexation and Immunity. Overall
Perspectives. Chapter 7 Value-Based Performance Measures. Value-Based
Measurement. Economic Profit or Economic Value Added. Use the Metric, Lose
the Rest. Total Business Return. Shareholder Value Added. Cash Value Added.
Cash Flow Return on Investment. Real Value Added. Common Values. Metric
Adjustments and Business Governance. Metric Adjustments: Compulsories Only.
Risk-Based Capital Requirements and Return on Economic Capital. How Not to
Choose Among Value-Based Metrics. Scope and Purpose for Value-Based
Metrics. Chapter 8 Ownership, Not Gamesmanship: Setting Targets and Ranges
for Performance-Based Plans. Best of Both Worlds. Trifold Guide to
Benchmarks. The Past Is Prologue. Not to Insult Chimpanzees. Interpreting
the Oracle. Multiple Personalities. Full Reconciliation of Market Value.
Setting Targets Based on Total Business Return. Run Away! Range and Domain:
Setting Intervals for Performance and Pay. Weightings, Award Leverage, and
Participant Influence. Incentive Risks, Calibration and Testing. Chapter 9
Business Units and Private Companies, Phantom Stock, and Performance Plans.
Private Companies. Phantom Stock and Subsidiary Equity. Phantom Stock Plan
Example Using Total Business Return. TBR Phantom Stock Grant Structure and
Leverage. Dilution Guidelines and Competitive Award Levels. Valuation
Approaches for the Phantom Stock Plan. Market Valuation Techniques.
Discounts for Lack of Marketability and Control. Valuation Accuracy versus
Incentive Efficacy. Reconciling Market Value and Formula Value.
Market-Indexed and Performance-Based Valuation Formulas. EBITDA as a
Valuation Yardstick. Equity-Based Incentive Plans Based on Book Value. Tale
of Three Cities. Adjusting Valuation Results. Performance Plans.
Value-Based Incentives versus Private Equity Incentives. Where the Rubber
Hits the Rod. Chapter 10 Using Stock to Create Effective Incentives. From
the Top. Off to the Races. Pros and Cons of Major Approaches to Stock-Based
Incentive Design. All-In-One. Let Them Eat Risk. Purely Stock-Based LTI
Approaches. Keeping the Horses in the Barn. Granting and Leverage.
Equity-Based Incentives in Venture-Stage Companies. Ownership Effects. A
Whole New Ball Game. Chapter 11 The Medium Is the Message. Incentives and
Financial Governance. Human Resources Perspectives. Glossary. Index.
Are Governance Defined. Old School. Act Now. You Do Not Run Your Company.
The New Standards. It Is Not About You. Last Things First. Bottom Lines.
Chapter 2 Business Valuation and Incentive Policy. The Rosetta Stone.
Stealing the Playbook of Business Valuation. Incentives and Value Creation.
Value Is a Function of the Quality and Quantity of Earnings. Cost of
Capital and Expected Returns. As Long as We're at It. What Are We Paying
For? Total Business Return. The DCF Model Serves as a Proxy for Other
Valuation Methods. Free Cash Flow. FCF and the Irrelevance of Accounting
Choices. Income and Capital: FCF's Drivers Should Be the Main Incentive
Drivers. The Shape of Things to Come. Quando, Quando, Quando. The Past Is
Relevant Only as Prologue. Valuation Perspective: Operational Results,
Debt, and Capital Structure. Chapter 3 Market Practices in Incentive Pay.
How Much Are We Paying for Management Incentives? Variable Pay versus
Incentive Pay. Mismatch Makers Other Market-Based Considerations of
Market-Based Consideration. Market Practices and Presumptions. Chapter 4
The New Standards. Common Sense. Bias Is the Boll Weevil of Value Creation.
Get Cynical. Incentivization and Its Discontents. Leading Charcter.
Guidelines for Incentive Design. Chapter 5 Risk and Executive Incentive
Pay. Risk Management Policy and Incentives. Sheep in Wolves' in Clothing.
Investors versus Management. The Risk Trade. Risk and Incentive
Calibration. The Wages of Risk: Estimating the Cost of Capital. Beta
Coefficients and the Capital Asset Pricing Model. Financial Leverage and
the Cost of Capital. Other Methods and Evidence for Attaching a Cost to
Capital. Chapter 6 Motive, Means, and Method: Evaluating Incentive
Performance Metrics. Role of Individual Performance in Incentive Pay.
Nonfinancial Goals. Evaluating Financial Metrics. Revenue, Volume, and
Gross Margin. Using Valuation Criteria to Choose Metrics. Context for
Evaluating Financial Metrics. Operating Income, EBIT, and Return on
Invested Capital. Two Wrongs Can Make a Right. On the Importance of Being
Earnest. Pretax Income, Net Income, EPS, and ROE. Debt, Share Repurchases,
EPS, and Stock Price Gains. Remedying Issues with Pre-tax Income, Net
Income, EPS, and ROE. Cash Flow Metrics. Indexation and Immunity. Overall
Perspectives. Chapter 7 Value-Based Performance Measures. Value-Based
Measurement. Economic Profit or Economic Value Added. Use the Metric, Lose
the Rest. Total Business Return. Shareholder Value Added. Cash Value Added.
Cash Flow Return on Investment. Real Value Added. Common Values. Metric
Adjustments and Business Governance. Metric Adjustments: Compulsories Only.
Risk-Based Capital Requirements and Return on Economic Capital. How Not to
Choose Among Value-Based Metrics. Scope and Purpose for Value-Based
Metrics. Chapter 8 Ownership, Not Gamesmanship: Setting Targets and Ranges
for Performance-Based Plans. Best of Both Worlds. Trifold Guide to
Benchmarks. The Past Is Prologue. Not to Insult Chimpanzees. Interpreting
the Oracle. Multiple Personalities. Full Reconciliation of Market Value.
Setting Targets Based on Total Business Return. Run Away! Range and Domain:
Setting Intervals for Performance and Pay. Weightings, Award Leverage, and
Participant Influence. Incentive Risks, Calibration and Testing. Chapter 9
Business Units and Private Companies, Phantom Stock, and Performance Plans.
Private Companies. Phantom Stock and Subsidiary Equity. Phantom Stock Plan
Example Using Total Business Return. TBR Phantom Stock Grant Structure and
Leverage. Dilution Guidelines and Competitive Award Levels. Valuation
Approaches for the Phantom Stock Plan. Market Valuation Techniques.
Discounts for Lack of Marketability and Control. Valuation Accuracy versus
Incentive Efficacy. Reconciling Market Value and Formula Value.
Market-Indexed and Performance-Based Valuation Formulas. EBITDA as a
Valuation Yardstick. Equity-Based Incentive Plans Based on Book Value. Tale
of Three Cities. Adjusting Valuation Results. Performance Plans.
Value-Based Incentives versus Private Equity Incentives. Where the Rubber
Hits the Rod. Chapter 10 Using Stock to Create Effective Incentives. From
the Top. Off to the Races. Pros and Cons of Major Approaches to Stock-Based
Incentive Design. All-In-One. Let Them Eat Risk. Purely Stock-Based LTI
Approaches. Keeping the Horses in the Barn. Granting and Leverage.
Equity-Based Incentives in Venture-Stage Companies. Ownership Effects. A
Whole New Ball Game. Chapter 11 The Medium Is the Message. Incentives and
Financial Governance. Human Resources Perspectives. Glossary. Index.
Preface. Acknowledgements. Chapter 1 To the CEO. Well-Designed Incentives
Are Governance Defined. Old School. Act Now. You Do Not Run Your Company.
The New Standards. It Is Not About You. Last Things First. Bottom Lines.
Chapter 2 Business Valuation and Incentive Policy. The Rosetta Stone.
Stealing the Playbook of Business Valuation. Incentives and Value Creation.
Value Is a Function of the Quality and Quantity of Earnings. Cost of
Capital and Expected Returns. As Long as We're at It. What Are We Paying
For? Total Business Return. The DCF Model Serves as a Proxy for Other
Valuation Methods. Free Cash Flow. FCF and the Irrelevance of Accounting
Choices. Income and Capital: FCF's Drivers Should Be the Main Incentive
Drivers. The Shape of Things to Come. Quando, Quando, Quando. The Past Is
Relevant Only as Prologue. Valuation Perspective: Operational Results,
Debt, and Capital Structure. Chapter 3 Market Practices in Incentive Pay.
How Much Are We Paying for Management Incentives? Variable Pay versus
Incentive Pay. Mismatch Makers Other Market-Based Considerations of
Market-Based Consideration. Market Practices and Presumptions. Chapter 4
The New Standards. Common Sense. Bias Is the Boll Weevil of Value Creation.
Get Cynical. Incentivization and Its Discontents. Leading Charcter.
Guidelines for Incentive Design. Chapter 5 Risk and Executive Incentive
Pay. Risk Management Policy and Incentives. Sheep in Wolves' in Clothing.
Investors versus Management. The Risk Trade. Risk and Incentive
Calibration. The Wages of Risk: Estimating the Cost of Capital. Beta
Coefficients and the Capital Asset Pricing Model. Financial Leverage and
the Cost of Capital. Other Methods and Evidence for Attaching a Cost to
Capital. Chapter 6 Motive, Means, and Method: Evaluating Incentive
Performance Metrics. Role of Individual Performance in Incentive Pay.
Nonfinancial Goals. Evaluating Financial Metrics. Revenue, Volume, and
Gross Margin. Using Valuation Criteria to Choose Metrics. Context for
Evaluating Financial Metrics. Operating Income, EBIT, and Return on
Invested Capital. Two Wrongs Can Make a Right. On the Importance of Being
Earnest. Pretax Income, Net Income, EPS, and ROE. Debt, Share Repurchases,
EPS, and Stock Price Gains. Remedying Issues with Pre-tax Income, Net
Income, EPS, and ROE. Cash Flow Metrics. Indexation and Immunity. Overall
Perspectives. Chapter 7 Value-Based Performance Measures. Value-Based
Measurement. Economic Profit or Economic Value Added. Use the Metric, Lose
the Rest. Total Business Return. Shareholder Value Added. Cash Value Added.
Cash Flow Return on Investment. Real Value Added. Common Values. Metric
Adjustments and Business Governance. Metric Adjustments: Compulsories Only.
Risk-Based Capital Requirements and Return on Economic Capital. How Not to
Choose Among Value-Based Metrics. Scope and Purpose for Value-Based
Metrics. Chapter 8 Ownership, Not Gamesmanship: Setting Targets and Ranges
for Performance-Based Plans. Best of Both Worlds. Trifold Guide to
Benchmarks. The Past Is Prologue. Not to Insult Chimpanzees. Interpreting
the Oracle. Multiple Personalities. Full Reconciliation of Market Value.
Setting Targets Based on Total Business Return. Run Away! Range and Domain:
Setting Intervals for Performance and Pay. Weightings, Award Leverage, and
Participant Influence. Incentive Risks, Calibration and Testing. Chapter 9
Business Units and Private Companies, Phantom Stock, and Performance Plans.
Private Companies. Phantom Stock and Subsidiary Equity. Phantom Stock Plan
Example Using Total Business Return. TBR Phantom Stock Grant Structure and
Leverage. Dilution Guidelines and Competitive Award Levels. Valuation
Approaches for the Phantom Stock Plan. Market Valuation Techniques.
Discounts for Lack of Marketability and Control. Valuation Accuracy versus
Incentive Efficacy. Reconciling Market Value and Formula Value.
Market-Indexed and Performance-Based Valuation Formulas. EBITDA as a
Valuation Yardstick. Equity-Based Incentive Plans Based on Book Value. Tale
of Three Cities. Adjusting Valuation Results. Performance Plans.
Value-Based Incentives versus Private Equity Incentives. Where the Rubber
Hits the Rod. Chapter 10 Using Stock to Create Effective Incentives. From
the Top. Off to the Races. Pros and Cons of Major Approaches to Stock-Based
Incentive Design. All-In-One. Let Them Eat Risk. Purely Stock-Based LTI
Approaches. Keeping the Horses in the Barn. Granting and Leverage.
Equity-Based Incentives in Venture-Stage Companies. Ownership Effects. A
Whole New Ball Game. Chapter 11 The Medium Is the Message. Incentives and
Financial Governance. Human Resources Perspectives. Glossary. Index.
Are Governance Defined. Old School. Act Now. You Do Not Run Your Company.
The New Standards. It Is Not About You. Last Things First. Bottom Lines.
Chapter 2 Business Valuation and Incentive Policy. The Rosetta Stone.
Stealing the Playbook of Business Valuation. Incentives and Value Creation.
Value Is a Function of the Quality and Quantity of Earnings. Cost of
Capital and Expected Returns. As Long as We're at It. What Are We Paying
For? Total Business Return. The DCF Model Serves as a Proxy for Other
Valuation Methods. Free Cash Flow. FCF and the Irrelevance of Accounting
Choices. Income and Capital: FCF's Drivers Should Be the Main Incentive
Drivers. The Shape of Things to Come. Quando, Quando, Quando. The Past Is
Relevant Only as Prologue. Valuation Perspective: Operational Results,
Debt, and Capital Structure. Chapter 3 Market Practices in Incentive Pay.
How Much Are We Paying for Management Incentives? Variable Pay versus
Incentive Pay. Mismatch Makers Other Market-Based Considerations of
Market-Based Consideration. Market Practices and Presumptions. Chapter 4
The New Standards. Common Sense. Bias Is the Boll Weevil of Value Creation.
Get Cynical. Incentivization and Its Discontents. Leading Charcter.
Guidelines for Incentive Design. Chapter 5 Risk and Executive Incentive
Pay. Risk Management Policy and Incentives. Sheep in Wolves' in Clothing.
Investors versus Management. The Risk Trade. Risk and Incentive
Calibration. The Wages of Risk: Estimating the Cost of Capital. Beta
Coefficients and the Capital Asset Pricing Model. Financial Leverage and
the Cost of Capital. Other Methods and Evidence for Attaching a Cost to
Capital. Chapter 6 Motive, Means, and Method: Evaluating Incentive
Performance Metrics. Role of Individual Performance in Incentive Pay.
Nonfinancial Goals. Evaluating Financial Metrics. Revenue, Volume, and
Gross Margin. Using Valuation Criteria to Choose Metrics. Context for
Evaluating Financial Metrics. Operating Income, EBIT, and Return on
Invested Capital. Two Wrongs Can Make a Right. On the Importance of Being
Earnest. Pretax Income, Net Income, EPS, and ROE. Debt, Share Repurchases,
EPS, and Stock Price Gains. Remedying Issues with Pre-tax Income, Net
Income, EPS, and ROE. Cash Flow Metrics. Indexation and Immunity. Overall
Perspectives. Chapter 7 Value-Based Performance Measures. Value-Based
Measurement. Economic Profit or Economic Value Added. Use the Metric, Lose
the Rest. Total Business Return. Shareholder Value Added. Cash Value Added.
Cash Flow Return on Investment. Real Value Added. Common Values. Metric
Adjustments and Business Governance. Metric Adjustments: Compulsories Only.
Risk-Based Capital Requirements and Return on Economic Capital. How Not to
Choose Among Value-Based Metrics. Scope and Purpose for Value-Based
Metrics. Chapter 8 Ownership, Not Gamesmanship: Setting Targets and Ranges
for Performance-Based Plans. Best of Both Worlds. Trifold Guide to
Benchmarks. The Past Is Prologue. Not to Insult Chimpanzees. Interpreting
the Oracle. Multiple Personalities. Full Reconciliation of Market Value.
Setting Targets Based on Total Business Return. Run Away! Range and Domain:
Setting Intervals for Performance and Pay. Weightings, Award Leverage, and
Participant Influence. Incentive Risks, Calibration and Testing. Chapter 9
Business Units and Private Companies, Phantom Stock, and Performance Plans.
Private Companies. Phantom Stock and Subsidiary Equity. Phantom Stock Plan
Example Using Total Business Return. TBR Phantom Stock Grant Structure and
Leverage. Dilution Guidelines and Competitive Award Levels. Valuation
Approaches for the Phantom Stock Plan. Market Valuation Techniques.
Discounts for Lack of Marketability and Control. Valuation Accuracy versus
Incentive Efficacy. Reconciling Market Value and Formula Value.
Market-Indexed and Performance-Based Valuation Formulas. EBITDA as a
Valuation Yardstick. Equity-Based Incentive Plans Based on Book Value. Tale
of Three Cities. Adjusting Valuation Results. Performance Plans.
Value-Based Incentives versus Private Equity Incentives. Where the Rubber
Hits the Rod. Chapter 10 Using Stock to Create Effective Incentives. From
the Top. Off to the Races. Pros and Cons of Major Approaches to Stock-Based
Incentive Design. All-In-One. Let Them Eat Risk. Purely Stock-Based LTI
Approaches. Keeping the Horses in the Barn. Granting and Leverage.
Equity-Based Incentives in Venture-Stage Companies. Ownership Effects. A
Whole New Ball Game. Chapter 11 The Medium Is the Message. Incentives and
Financial Governance. Human Resources Perspectives. Glossary. Index.