Read the article (separately provided) written by Larcker, Liaqat, and Brian (2012) regarding CEO compensation in the U.S. and answer the following questions.

1. Kaplan and Rauh (2010) find that executive compensation and the income earned by other highly paid professionals such as hedge fund managers, private equity managers, venture capitalists, lawyers and professional athletes grew by roughly the same order of magnitude during the period 1994 to 2005. Exhibits 2 and 3 of the article show that highest paid CEOs earn similar amount of money as highest paid actors, musicians, or athletes. Do these findings suggest that CEOs are, on average, fairly compensated? Please discuss (20 Points).

1. Exhibit 1 shows that accounting numbers such as earnings per share (EPS), net income, operating margin and operating income are widely used to measure financial performance and determine CEOs' short-term and long-term compensation. Discuss the pros and cons of linking CEO compensation to accounting numbers. (20 Points)

1. Exhibit 2 shows that most companies use multiple performance metrics. For example, the disclosed performance metrics used by Viacom includes operating income, free cash flow, strategic initiatives, ratings, cost reduction, corporate goals, compliance, and policy objectives. Discuss the advantages of using multiple performance indicators to determine CEO compensation. (20 Points)