JOSE MARIA COLLEGE FOUNDATION, INC.

Philippine-Japan Friendship Highway,

Panacan, Davao City

In Partial Fulfillment
of the Requirements for the

Submitted by:

Ragas,Marcus
Dawis, Nicole Joy
Secad, Mecah
Tapang, Rea

Submitted to:

Jay Punayan, CPA , MPA

 Executive Summary

This study investigates the impact of CEO pay on the performance of the company
and compensation on the performance of the company. The investor concerns about
the excessive compensation have led some companies to limit the compensation
paid to their top executive. Study authors found this time, CEO pay did not positively
impact long-term stock performance. Additionally, overcompensation for
underperformance shows that executives receive a higher rate than stock
performance.

In summary, stock prices have a direct and significant impact on the compensation
of a CEO, as they are often tied to various stock-based incentives and awards
designed to align the CEO's interests with those of shareholders and incentivize
strong company performance.

Background

According to Adam Hayes (2023), the chief executive officer (CEO) is the highest-
ranking person in a company. While every company differs, CEOs are often
responsible for expanding the company, driving profitability, and in the case of public
companies, improving share prices. CEOs manage the overall operations of a
company. The study has a practical implication for policymakers, business owners,
shareholders, and executives by suggesting aligning their business strategies based
on compensation parameters for achieving the best firm performance. CEO
compensation schemes are mostly long-term incentives. Long-term incentives, as
the name suggests, are awards for CEO accomplishment over the course of three to
five years. As with short-term incentives, compensating committees scale up long-
term incentive schemes with objective and stretch incentives.

It's important to note that the structure and amount of CEO compensation can vary
significantly between companies and industries. Additionally, CEO compensation
practices have been a subject of debate and scrutiny, as excessive CEO pay and the
potential for conflicts of interest have led to calls for greater transparency and
accountability in executive compensation.

In summary, stock prices have a direct and significant impact on the compensation
of a CEO, as they are often tied to various stock-based incentives and awards
designed to align the CEO's interests with those of shareholders and incentivize
strong company performance.

Case Evaluation

Stock prices can have a significant impact on the compensation of a CEO (Chief
Executive Officer). CEO compensation is typically structured in a way that ties
financial incentives to the performance of the company and, by extension, its stock
price. Here are some key ways in which stock prices affect CEO compensation:

Stock Options: Many CEOs are granted stock options as part of their compensation
packages. Stock options give the CEO the right to buy a certain number of company
shares at a predetermined price, known as the "strike price." If the stock price
increases above the strike price, the CEO can exercise these options, buy the
shares at the lower price, and sell them at the current market price, resulting in a
profit. Higher stock prices can lead to more valuable stock options for the CEO.

Restricted Stock: CEOs may also receive grants of restricted stock, which are
shares of the company's stock that cannot be sold or transferred until certain
conditions are met, such as a specified vesting period or the achievement of certain
performance targets. When stock prices rise, the value of these restricted shares
increases, directly benefiting the CEO.

Performance-Based Bonuses: Many CEO compensation packages include

performance-based bonuses tied to specific financial metrics, including stock price
performance. When the company's stock price rises, it often indicates that the
company is performing well, and this can trigger larger bonuses for the CEO.

Long-Term Incentive Plans: Some companies offer long-term incentive plans

(LTIPs) that include stock-based awards. These plans are designed to align the
interests of the CEO with those of shareholders, as they are based on the company's
long-term performance, including stock price growth.

Share Ownership Guidelines: Some companies require their CEOs to own a certain
number of shares in the company or a multiple of their base salary. As the stock
price rises, CEOs may need to acquire more shares to meet these ownership
guidelines, leading to increased stock ownership and wealth tied to the stock price.

Stock-Based Retirement Benefits: CEOs may also have stock-based retirement

benefits, which can grow in value as the stock price increases. This can provide
long-term financial security for the CEO.

Proposed Solution

Problems: Stock prices affect various corporate decisions such as the amount of
the CEO compensation.

ALTERNATIVES ADVANTAGES DISADVANTAGES

Most executive compensation If your company performs very

plans include a fixed yearly well, but you are only
salary, also known as a base compensated with cash
CEO salary. Companies often pay incentives, for example, you
Compensation this throughout the year in could miss out on a huge
Plan monthly or bimonthly amounts. potential for stock appreciation.
Benefits: Executives may Also, compensation paid through
receive benefits like health a long-term incentive plan will be
insurance, life insurance, and taxed.
severance pay.

If shareholders are happy and Stock prices are risky and

the company is doing well, as
reflected by its share price, its
High Stock executives are likely to keep
Prices their jobs and receive increases
in compensation.
volatile. Prices can be erratic,
rising and declining quickly,
often in relation to companies'
policies, which individual
investors do not influence. A
high stock price also tends to
discourage a potential takeover.

Conclusion

In general, the CEO has a huge responsibility in the company. The performance of
the company will depend on the CEO, and the Stock prices will be affected if the
company cannot manage successfully
- That's why the CEO ensures that the company runs as best it can and achieves
financial success. Higher CEO compensation leads to higher firm performance.

- The CEO also plays a critical role in ensuring an appropriate balance between
near-term profit initiatives).

Recommendation

CEOs are honestly increasing their salaries and incentives and based on their
wages they can develop and grow their company and increase their income but they
should be fair to their other employees, their employees are also part of their
Company, and the employees should also receive the fair salary and incentives so
that they want to stay that company and I recommend that if the sales are good and
high the incentives or compensation also become high, aside from that they should
pursue the consumer.

How do stock prices affect the compensation of the CEO? Stock prices affect various
corporate decisions such as the amount of CEO compensation. The CEO should be
careful when it comes to decision making and aside from that the CEO should care
about the stock prices because a company's stock prices reflect investor perception
of its ability to earn and grow its profit in the future.

Implementation

Goals Step Description Implementation

Incentives -Define Objective 13th Month
-Determine the Budget
-Select the Right
Incentives
Stock Price -Analyze Price Trends 3 Months
-Select a Stock
Higher Firm -Set Clear Objectives and 6-12 Months
Performance Goals
- Assess the Current
State
- Identify Key
Performance Indicators
 Decision Criteria Total
Alternative
1 2 3 4
1. Promotion of diversity 15 10 15 20 60
and inclusion
2. Alignment with cultural 15 10 10 20 55
values.
3. Global Consistency 20 20 20 10 70
and simplicity

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