Tournament pay:
A)reduces profits because of the excessive pay to chief executive officers implied by such plans
B)may help to rationalize why some ineffective senior executives continue to be employed by a firm
C)explains why "hostile" corporate takeovers occur
D)explains why chief executive officers typically serve long periods at the top of their companies

Question

Quizplus · Accepted Answer

Tournament pay, which rewards top performers with higher pay than their peers, can create a rationale for retaining ineffective senior executives who may be needed to fill lower positions in the pay hierarchy. This can lead to a lack of turnover at the top and limit opportunities for advancement for younger employees, ultimately hurting a company's performance.

Tournament Pay