Another way to motivate managers to take a long-run perspective is by compensating them on the basis of changes in the market price of the company's stock.

Question

Quizplus · Accepted Answer

By compensating managers based on changes in the market price of the company's stock, they are incentivized to focus on long-term success and growth rather than short-term gains. This aligns their interests with those of the shareholders and encourages decision-making that maximizes the company's value in the long run.

Another Way to Motivate Managers to Take a Long-Run Perspective