Select two companies. They should have DEF14A or a similar filing on the SEC’s
website: sec.gov
For both companies that you selected, evaluate the extent to which accounting influence management compensation of your companies.
For example, DESTINATION XL GROUP, INC, states that “The performance targets [for the CEO] included Corporate targets (Sales and Adjusted EBITDA)…”
So, Sales is clearly is an accounting figure directly from the Income Statement. The other figure is EBITDA (Earnings Before Interest, Taxes, Depreciation, and
Amortization) and it is “Adjusted” for events that the compensation committee believes do not relate to management performance. These amounts,
Earnings, Interest, Taxes, Depreciation, and Amortization are clearly accounting figures from the Income Statement. The committee excludes Interest, Taxes,
Depreciation, and Amortization from the Earnings when they decide how well the CEO has performed. As an aside, it seems to me that the CEO can influence
these amounts. The CEO might well be able to raise capital through debt increasing interest and encourage aggressive tax positions, but these decisions to
increase interest or be aggressive with taxes are not part of the CEO’s performance metric.
