{"product_id":"the-new-standards-isbn-9780470559895","title":"The New Standards","description":"\u003cb\u003eMake the most of the new standards\u003c\/b\u003e  \u003cp\u003eEvery 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.\u003c\/p\u003e \u003cp\u003ePacked with examples, \u003ci\u003eThe New Standards\u003c\/i\u003e insightfully discusses:\u003c\/p\u003e \u003cul\u003e \u003cli\u003e \u003cp\u003eHow to link pay with business results that create long-term value\u003c\/p\u003e \u003c\/li\u003e \u003cli\u003e \u003cp\u003eWhy incentive structures can discourage management from reasonable risk-taking, in some cases, and can enocourage imprudent risks in others\u003c\/p\u003e \u003c\/li\u003e \u003cli\u003e \u003cp\u003eThe full range of inputs that should guide proper incentive policy\u003c\/p\u003e \u003c\/li\u003e \u003cli\u003e \u003cp\u003eWhy performance measures must reflect both the quality and quantity of earnings\u003c\/p\u003e \u003c\/li\u003e \u003cli\u003e \u003cp\u003eRisk, executive behavior, and the cost of capital\u003c\/p\u003e \u003c\/li\u003e \u003cli\u003e \u003cp\u003eHow to use valuation criteria when choosing metrics\u003c\/p\u003e \u003c\/li\u003e \u003cli\u003e \u003cp\u003eThe pros and cons of common approaches to stock-based incentive pay\u003c\/p\u003e \u003c\/li\u003e \u003c\/ul\u003e \u003cp\u003eWritten 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 \u003ci\u003eThe New Standards\u003c\/i\u003e.\u003c\/p\u003e  \u003cp\u003ePreface ix\u003c\/p\u003e \u003cp\u003eAcknowledgements xv\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 1 To the CEO 1\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eWell-Designed Incentives Are Governance Defined 3\u003c\/p\u003e \u003cp\u003eOld School 6\u003c\/p\u003e \u003cp\u003eAct Now 7\u003c\/p\u003e \u003cp\u003eYou Do Not Run Your Company 9\u003c\/p\u003e \u003cp\u003eThe New Standards 10\u003c\/p\u003e \u003cp\u003eIt Is Not about You 14\u003c\/p\u003e \u003cp\u003eLast Things First 16\u003c\/p\u003e \u003cp\u003eBottom Lines 17\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 2 Business Valuation and Incentive Policy 19\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Rosetta Stone 20\u003c\/p\u003e \u003cp\u003eStealing the Playbook of Business Valuation 21\u003c\/p\u003e \u003cp\u003eIncentives and Value Creation 25\u003c\/p\u003e \u003cp\u003eValue is a Function of the Quality and Quantity of Earnings 28\u003c\/p\u003e \u003cp\u003eCost of Capital and Expected Returns 30\u003c\/p\u003e \u003cp\u003eAs Long as We’re at it 32\u003c\/p\u003e \u003cp\u003eWhat Are We Paying For? 34\u003c\/p\u003e \u003cp\u003eTotal Business Return 37\u003c\/p\u003e \u003cp\u003eThe DCF Model Serves as a Proxy for Other Valuation Methods 40\u003c\/p\u003e \u003cp\u003eFree Cash flow 43\u003c\/p\u003e \u003cp\u003eFCF and the Irrelevance of Accounting Choices 45\u003c\/p\u003e \u003cp\u003eIncome and Capital: FCF’s Drivers Should Be the Main Incentive Drivers 46\u003c\/p\u003e \u003cp\u003eThe Shape of Things to Come 47\u003c\/p\u003e \u003cp\u003eQuando, Quando, Quando 49\u003c\/p\u003e \u003cp\u003eThe Past is Relevant Only as Prologue 50\u003c\/p\u003e \u003cp\u003eValuation Perspective: Operational Results, Debt, and Capital Structure 52\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 3 Market Practices in Incentive Pay 59\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eHow Much Are We Paying for Management Incentives? 64\u003c\/p\u003e \u003cp\u003eVariable Pay versus Incentive Pay 67\u003c\/p\u003e \u003cp\u003eMismatch Makers 74\u003c\/p\u003e \u003cp\u003eOther Market-Based Considerations of Market-Based Consideration 75\u003c\/p\u003e \u003cp\u003eMarket Practices and Presumptions 77\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 4 The New Standards 83\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eCommon Sense 91\u003c\/p\u003e \u003cp\u003eBias is the Boil Weevil of Value Creation 92\u003c\/p\u003e \u003cp\u003eGet Cynical 93\u003c\/p\u003e \u003cp\u003eIncentivization and its Discontents 95\u003c\/p\u003e \u003cp\u003eLeading Chartcter 97\u003c\/p\u003e \u003cp\u003eGuidelines for Incentive Design 99\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 5 Risk and Executive Incentive Pay 107\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eRisk Management Policy and Incentives 108\u003c\/p\u003e \u003cp\u003eSheep in Wolves’ Clothing 113\u003c\/p\u003e \u003cp\u003eInvestors versus Management 113\u003c\/p\u003e \u003cp\u003eThe Risk Trade 115\u003c\/p\u003e \u003cp\u003eRisk and Incentive Calibration 119\u003c\/p\u003e \u003cp\u003eThe Wages of risk: Estimating the Cost of Capital 121\u003c\/p\u003e \u003cp\u003eBeta Coefficients and the Capital Asset Pricing Model 121\u003c\/p\u003e \u003cp\u003eFinancial Leverage and the Cost of Capital 123\u003c\/p\u003e \u003cp\u003eOther Methods and Evidence for Attaching a Cost to Capital 125\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 6 Motive, Means, and Method: Evaluating Incentive Performance Metrics 131\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eRole of Individual Performance in Incentive Pay 132\u003c\/p\u003e \u003cp\u003eNonfinancial Goals 133\u003c\/p\u003e \u003cp\u003eEvaluating Financial Metrics 137\u003c\/p\u003e \u003cp\u003eRevenue, Volume, and Gross Margin 138\u003c\/p\u003e \u003cp\u003eUsing Valuation Criteria to Choose Metrics 141\u003c\/p\u003e \u003cp\u003eContext for Evaluating Financial Metrics 142\u003c\/p\u003e \u003cp\u003eOperating Income, EBIT, and Return on Invested Capital 143\u003c\/p\u003e \u003cp\u003eTwo Wrongs Can Make a Right 146\u003c\/p\u003e \u003cp\u003eOn the Importance of Being Earnest 149\u003c\/p\u003e \u003cp\u003ePretax Income, Net Income, EPS, and ROE 149\u003c\/p\u003e \u003cp\u003eDebt, Share Repurchases, EPS, and Stock Price Gains 150\u003c\/p\u003e \u003cp\u003eRemedying Issues with Pretax Income, Net Income, EPS, and ROE 154\u003c\/p\u003e \u003cp\u003eCash flow Metrics 155\u003c\/p\u003e \u003cp\u003eIndexation and Immunity 158\u003c\/p\u003e \u003cp\u003eOverall Perspectives 160\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 7 Value-Based Performance Measures 163\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eValue-Based Measurement 165\u003c\/p\u003e \u003cp\u003eEconomic Profit or Economic Value Added 167\u003c\/p\u003e \u003cp\u003eUse the Metric, Lose the Rest 169\u003c\/p\u003e \u003cp\u003eTotal Business Return 170\u003c\/p\u003e \u003cp\u003eShareholder Value Added 174\u003c\/p\u003e \u003cp\u003eCash Value Added 174\u003c\/p\u003e \u003cp\u003eCash Flow Return on Investment 175\u003c\/p\u003e \u003cp\u003eReal Value Added 177\u003c\/p\u003e \u003cp\u003eCommon Values 179\u003c\/p\u003e \u003cp\u003eMetric Adjustments and Business Governance 180\u003c\/p\u003e \u003cp\u003eMetric Adjustments: Compulsories Only 185\u003c\/p\u003e \u003cp\u003eRisk-Based Capital Requirements and Return on Economic Capital 188\u003c\/p\u003e \u003cp\u003eHow Not to choose Among Value-Based Metrics 191\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 8 Ownership, Not Gamesmanship: Setting Targets and Ranges for Performance-Based Plans 195\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eBest of Both Worlds 196\u003c\/p\u003e \u003cp\u003eTrifold guide to Benchmarks 197\u003c\/p\u003e \u003cp\u003eThe Past is Prologue 198\u003c\/p\u003e \u003cp\u003eNot to Insult Chimpanzees 203\u003c\/p\u003e \u003cp\u003eInterpreting the Oracle 205\u003c\/p\u003e \u003cp\u003eMultiple Personalities 206\u003c\/p\u003e \u003cp\u003eFull Reconciliation to Market Value 209\u003c\/p\u003e \u003cp\u003eSetting Targets Based on Total Business Return 215\u003c\/p\u003e \u003cp\u003eRun Away! 219\u003c\/p\u003e \u003cp\u003eRange and Domain: setting Intervals for Performance and Pay 222\u003c\/p\u003e \u003cp\u003eWeightings, Award Leverage, and Participant Influence 227\u003c\/p\u003e \u003cp\u003eIncentive Risks, Calibration, and Testing 228\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 9 Business Units and Private Companies, Phantom Stock and Performance Plans 231\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003ePrivate Companies 233\u003c\/p\u003e \u003cp\u003ePhantom Stock and Subsidiary Equity 234\u003c\/p\u003e \u003cp\u003ePhantom Stock Plan Example Using Total Business Return 235\u003c\/p\u003e \u003cp\u003eTBR Phantom Stock Grant Structure and Leverage 239\u003c\/p\u003e \u003cp\u003eDilution Guidelines and Competitive Award Levels 241\u003c\/p\u003e \u003cp\u003eValuation Approaches for the Phantom Stock Plan 242\u003c\/p\u003e \u003cp\u003eMarket Valuation Techniques 243\u003c\/p\u003e \u003cp\u003eDiscounts for Lack of Marketability and Control 244\u003c\/p\u003e \u003cp\u003eValuation Accuracy versus Incentive Efficacy 245\u003c\/p\u003e \u003cp\u003eReconciling and Funding Market Value and Formula Value 246\u003c\/p\u003e \u003cp\u003eMarket-Indexed and Performance-Based Valuation formulas 248\u003c\/p\u003e \u003cp\u003eEBITDA as a Valuation Yardstick 251\u003c\/p\u003e \u003cp\u003eEquity-Based Incentive Plans Based on Book Value 252\u003c\/p\u003e \u003cp\u003eTale of Three Cities 252\u003c\/p\u003e \u003cp\u003eAdjusting Valuation Results 253\u003c\/p\u003e \u003cp\u003ePerformance Plans 254\u003c\/p\u003e \u003cp\u003eValue-Based Incentives versus Private Equity Incentives 259\u003c\/p\u003e \u003cp\u003eWhere the Rubber Hits the Road 262\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 10 Using Stock to Create Effective Incentives 265\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eFrom the Top 266\u003c\/p\u003e \u003cp\u003eOff to the Races 269\u003c\/p\u003e \u003cp\u003ePros and Cons of Major Approaches to Stock-Based Incentive Design 271\u003c\/p\u003e \u003cp\u003eAll-In-One 273\u003c\/p\u003e \u003cp\u003eLet Them Eat Risk 275\u003c\/p\u003e \u003cp\u003ePurely Stock-Based LTI Approaches 278\u003c\/p\u003e \u003cp\u003eKeeping the Horses in the Barn 280\u003c\/p\u003e \u003cp\u003eGranting and Leverage 282\u003c\/p\u003e \u003cp\u003eEquity-Based Incentives in Venture-Stage Companies 284\u003c\/p\u003e \u003cp\u003eOwnership Effects 287\u003c\/p\u003e \u003cp\u003eA Whole New Ball Game 287\u003c\/p\u003e \u003cp\u003e\u003cb\u003eChapter 11 The Medium Is the Message 289\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eIncentive and Financial Governance 290\u003c\/p\u003e \u003cp\u003eHuman Resource Perspectives 293\u003c\/p\u003e \u003cp\u003eGlossary 301\u003c\/p\u003e \u003cp\u003eIndex 305\u003c\/p\u003e \u003cb\u003eRichard N. Ericson\u003c\/b\u003e 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.  Companies are paying closer attention to executive compensation than ever before—in response to growing scrutiny from shareholders, the federal government, and others. With stakeholders demanding closer alignment of pay and performance, boards and compensation committees are under heavy pressure to ensure that their executive incentive plans are well designed and deliver appropriate rewards for achieving the company's objectives.  \u003cp\u003e\u003ci\u003eThe New Standards\u003c\/i\u003e equips board members as well as leaders and professionals in compensation, finance, and planning with a pragmatic blueprint for incentive pay. Mr. Ericson shows how to create enduring incentive structures that can adapt to a wide range of business conditions and market events for the greatest business impact and maximum return on investment.\u003c\/p\u003e \u003cp\u003eStarting with an open letter to every Chief Executive Officer, \u003ci\u003eThe New Standards\u003c\/i\u003e authoritatively discusses:\u003c\/p\u003e \u003cul\u003e \u003cli\u003e \u003cp\u003eHow to design senior management incentive plans that encourage long-term, high-quality business results\u003c\/p\u003e \u003c\/li\u003e \u003cli\u003e \u003cp\u003eHow basic principles of finance and valuation can be used to select performance metrics, establish performance targets, and calibrate incentive payouts\u003c\/p\u003e \u003c\/li\u003e \u003cli\u003e \u003cp\u003eWhy companies should use incentive pay for senior management as a proactive business governance tool specifically designed to increase business performance\u003c\/p\u003e \u003c\/li\u003e \u003cli\u003e \u003cp\u003eWays to design and test incentives to ensure that they do not encourage improper risk-taking or undue risk aversion\u003c\/p\u003e \u003c\/li\u003e \u003c\/ul\u003e \u003cp\u003eWith market data and an abundance of how-to examples, \u003ci\u003eThe New Standards\u003c\/i\u003e provides essential tips and tools for setting proper goals for business financial performance. Author and incentive design specialist Richard Ericson demystifies incentive design, enabling boards to better serve their shareholders by focusing management on the most appropriate performance criteria.\u003c\/p\u003e  \u003cb\u003eMake the most of the new standards\u003c\/b\u003e  \u003cp\u003eEvery 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.\u003c\/p\u003e \u003cp\u003ePacked with examples, \u003ci\u003eThe New Standards\u003c\/i\u003e insightfully discusses:\u003c\/p\u003e \u003cul\u003e \u003cli\u003e \u003cp\u003eHow to link pay with business results that create long-term value\u003c\/p\u003e \u003c\/li\u003e \u003cli\u003e \u003cp\u003eWhy incentive structures can discourage management from reasonable risk-taking, in some cases, and can enocourage imprudent risks in others\u003c\/p\u003e \u003c\/li\u003e \u003cli\u003e \u003cp\u003eThe full range of inputs that should guide proper incentive policy\u003c\/p\u003e \u003c\/li\u003e \u003cli\u003e \u003cp\u003eWhy performance measures must reflect both the quality and quantity of earnings\u003c\/p\u003e \u003c\/li\u003e \u003cli\u003e \u003cp\u003eRisk, executive behavior, and the cost of capital\u003c\/p\u003e \u003c\/li\u003e \u003cli\u003e \u003cp\u003eHow to use valuation criteria when choosing metrics\u003c\/p\u003e \u003c\/li\u003e \u003cli\u003e \u003cp\u003eThe pros and cons of common approaches to stock-based incentive pay\u003c\/p\u003e \u003c\/li\u003e \u003c\/ul\u003e \u003cp\u003eWritten 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 \u003ci\u003eThe New Standards\u003c\/i\u003e.\u003c\/p\u003e","brand":"Wiley","offers":[{"title":"Default Title","offer_id":47990299525349,"sku":"NP9780470559895","price":90.0,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9780470559895.jpg?v=1761787258","url":"https:\/\/k12savings.com\/es\/products\/the-new-standards-isbn-9780470559895","provider":"K12savings","version":"1.0","type":"link"}