Test Your Knowledge

Advanced Concepts in Executive Compensation (Course C6A)

Instructions: Choose an answer for each question and then click on the "Get Results" button at the end of the quiz.

1. Which of the following provides oversight for management decisions by establishing rights and relationships for controlling organizations?
A. Shareholders
B. Corporate governance
C. Congress
D. Institutional investors

2. What committee of the board of directors has the most oversight regarding financial reporting processes and the financial statements?
A. Executive
B. Compensation
C. Audit
D. Governance

3. Who is formally responsible for evaluating the performance of the CEO?
A. Vice President of HR
B. Shareholders
C. External consultants
D. Board of directors

4. For an executive to avoid economic benefit for tax purposes, which of the following criteria must be met?
A. The compensation must have a tangible, quantifiable value.
B. There must be no substantial risk of forfeiture.
C. Plan benefits must be subject to the claims of general creditors.
D. The plan provisions must be documented in writing and accessible to the public.

5. Dividends are generally subject to which of the following tax rates?
A. Ordinary income
B. Capital gains
C. Corporate
D. Marginal

6. In meeting the reporting requirements of Section 16, what do insiders need to disclose on SEC Form 3?
A. Equity holdings as of the date of becoming an insider
B. Details of equity transactions as they occur
C. All equity transactions made in the past year
D. Equity transactions made under qualified benefits plans

7. Under SEC Rule 10(b)5, what is the maximum penalty for an individual who knowingly uses insider information to profit from the sale of company shares?
A. Repayment of the proceeds plus a 10% penalty
B. Disqualification from eligibility for future equity compensation plans
C. A fine and/or probation
D. A prison term

8. Which type of performance measure is intended to focus on factors important to shareholders?
A. Value-based
B. Nonfinancial
C. Qualitative

9. What should companies in cyclical industries consider when selecting long-term incentives?
A. The fact that executives prefer nonqualified stock options
B. The motivational and retention aspects of phantom stock
C. The legal implications of using company stock
D. The impact of stock volatility on equity compensation

10. Which deferred compensation financing approach is not subject to the claims of general creditors?
A. General assets
B. Corporate-owned life insurance
C. Rabbi trust
D. Secular trust

The Test Your Knowledge questions are intended to provide a small sample of the information covered in a particular course. Passing this test should not be considered an indicator that you also will pass the related certification exam. No portion of this document may be reproduced in any form without express written permission from WorldatWork. Copyright 2005 WorldatWork.

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