Excessive Executive Compensation - Performance-Based Compensation (LO. 3, 4)

Amber, a publicly held corporation, currently pays its president an annual salary of $900,000. In addition, it contributes $20,000 annually to a defined contribution pension plan for him. As a means of increasing company profitability, the board of directors decides to increase the president's compensation. Two proposals are being considered. Under the first proposal, the salary and pension contribution for the president would be increased by 30%. Under the second proposal, Amber would implement a performance-based compensation program that is projected to provide about the same amount of additional compensation and pension contribution for the president.

a. Determine the new salary to be paid under Proposal 1 (the 30% increase). $

Determine the new contribution to the defined contribution pension plan to be paid under Proposal 1 (the 30% increase). $

Determine the amount of the new salary that would be deductible by Amber under Proposal 1 (the 30% increase). $

Determine the amount of the contribution to the defined contribution pension plan that would be deductible by Amber under Proposal 1 (the 30% increase). $