The most common approach to motivating executives to make decisions that are in the best interests of stockholders is _____.
A)high base salaries with few bonuses
B)average base salaries with significant firm performance bonuses
C)a long-term incentive plan using stock options
D)average base salary with performance-based perks

Question

Quizplus · Accepted Answer

A long-term incentive plan using stock options is the most common approach to motivating executives to make decisions that are in the best interests of stockholders because it ties the executive's compensation to the long-term success of the company and the value of the company's stock. This aligns the interests of the executive with those of the stockholders. Higher base salaries with few bonuses or performance-based perks may motivate executives to focus on short-term gains at the expense of long-term success, while average base salaries with firm performance bonuses may not encourage executives to take risks that could lead to higher long-term returns.

The Most Common Approach to Motivating Executives to Make Decisions