Executive Compensation & Benefits Flashcards
7 cards from real CCP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Executive Compensation & Benefits flashcards as text
Which type of executive benefit provides a supplemental retirement income stream outside of qualified plan limits?
Answer: Supplemental Executive Retirement Plan (SERP)
A SERP is a nonqualified plan designed to provide retirement benefits to executives that exceed the IRS limits applicable to qualified plans like 401(k)s.
When valuing stock options for executive compensation reporting purposes, which model is most commonly referenced under ASC 718?
Answer: Black-Scholes-Merton model
ASC 718 requires stock-based compensation to be measured at fair value, and the Black-Scholes-Merton model is the most widely used option pricing model for this purpose.
A 'say-on-pay' vote is best described as:
Answer: An advisory shareholder vote on the executive compensation program
Mandated by the Dodd-Frank Act, say-on-pay is a non-binding (advisory) shareholder vote on the overall executive compensation program at least every three years.
What does a 'double trigger' in a change-in-control severance agreement require?
Answer: Both a change in control AND a qualifying termination event before benefits are triggered
A double trigger requires two events: first a change in control occurs, and second the executive experiences a qualifying termination (e.g., involuntary termination or constructive dismissal).
Which of the following best describes the role of a compensation committee's independent consultant?
Answer: To provide objective advice to the board on executive pay design and market data
An independent compensation consultant advises the board's compensation committee on market data, pay program design, and governance best practices without conflicting advisory roles to management.
Performance Share Units (PSUs) differ from Restricted Stock Units (RSUs) primarily because PSUs:
Answer: Vest based on achieving specific performance goals over a measurement period
PSUs require the achievement of predefined performance metrics (such as EPS growth or relative TSR) during a performance period before shares are earned, unlike RSUs which typically vest on time alone.
What is the primary tax advantage of an IRC Section 83(b) election for restricted stock grants?
Answer: It allows the executive to pay ordinary income tax at grant on the current low value instead of at vesting
An 83(b) election lets the executive recognize ordinary income on the fair market value at grant (often low) rather than at vesting, converting subsequent appreciation to long-term capital gains.