Basing executive compensation on accounting earnings:
I. Is a popular practice in Canada
II. Is sharply criticized because of potential negative long-term effects
III. Leads to unbiased accounting practices
A)I and II only
B)I and III only
C)II and III only
D)I, II, and III

Question

Quizplus · Accepted Answer

While basing executive compensation on accounting earnings is a popular practice in Canada, it is sharply criticized for potentially encouraging short-term focus and manipulation of accounting practices, leading to negative long-term effects. Therefore, statements I and II are correct. However, it does not necessarily lead to unbiased accounting practices, so statement III is incorrect.

Basing Executive Compensation on Accounting Earnings