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A classroom exercise on executive incentive compensation schemes
Author(s) -
Elitzur R. Ramy
Publication year - 1995
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090160607
Subject(s) - incentive , compensation (psychology) , audit , accounting , control (management) , executive compensation , business , actuarial science , economics , psychology , microeconomics , management , social psychology
This paper describes a classroom exercise that has been used in several graduate courses. The exercise provides the students with a framework for understanding the rationale behind some of the mechanisms we observe in reality: incentive compensation plans for executives, Generally Accepted Accounting Principles (GAAP), auditing, and lawsuits against auditors. As such, the exercise provides some answers for several questions of ‘why’ before getting into the ‘how’ of reporting. The case can be used in courses dealing with financial accounting, managerial control and microeconomics in the MBA level.