Page 682 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

Glossary 667

carved-out life insurance Company provides first $50,000 of coverage, and employee purchases
the rest.
cash accounting Revenue is reflected as income when received. Similarly, debts are reflected as
expenses when paid. See accrual accounting.
cash balance pension plan A defined-benefit plan that looks like a defined-contribution plan
with each employee having an account credited with an employer contribution and a specified interest
rate.
cash equivalents Liquid investments of less than a year not subject to market volatility.
cash exercise Purchasing stock under option (exercising the option) with cash.
cash flow Net effect of cash received versus paid out during the year.
cash flow statement A direct or indirect method of reporting cash taken in along with cash paid out
during the year and the net increase or decrease in cash for the year.
cashless stock option exercise Rather than use cash, the optionee obtains a loan from a stock-
broker and uses it to purchase a stated number of stock options. The broker sells the stock and forwards
the proceeds less loan costs, brokerage fees, and tax withholding. Another form of cashless stock option
exercise is done by tendering stock already owned. See stock-for-stock exercise.
cash or deferred compensation arrangement (CODA) A cash or deferred compensation arrange-
ment is often called a 401(k) plan because that is the section in the Internal Revenue Code, added in
the 1978 Revenue Act, in which it is defined.
cashout Liquidating ownership.
cash stock option exercise The purchase of a stated number of shares under option by cash.
cash supplement A payment in addition to an earned award (typically to pay taxes on that award).
cash surrender value The liquidation value or cash amount that an individual can receive for
surrendering a contract. Often this is part of a life insurance contract.
cash value method A form of split-dollar insurance in which the employer pays a premium equal to
the increase in the cash value of the policy.
catch-up stock option A grant made between normal grant dates for recent hires and promotions.
caveat emptor “Let the buyer beware.”
centralization The movement of authority and responsibility up through the organization, with
power in the hands of a few.
centralized See centralization.
central tendency Assigning an average rating to all rates.
CEO See chief executive officer.
certificate A document attesting to the validity of the item described. This could range from a
certificate of attendance to a certificate of shares of stock owned. The name of the person is reported
along with other pertinent facts.
certificate of deposit An interest-bearing document given in exchange for money deposited that can
be sold or traded.
certificate of incorporation Document filed with a state at time of incorporation, providing
company name, business purpose, identification of directors, and number of shares authorized for use
by company.
Certified Financial Planner (CFP) A designation of professional qualifications given by the
International Board of Standards and Practices for Certified Financial Planners, Inc. (IBCFP).