One way often used to insure that management decisions are in the best interest of the stockholdersis to
A) tie management compensation to the performance of the company's common stock price.
B) remove management's perquisites.
C) tie management compensation to the level of earnings per share.
D) threaten to fire managers who are seen as not performing adequately.

Question

Quizplus · Accepted Answer

Tying management compensation to the performance of the company's common stock price aligns their interests with those of the stockholders, as they will only benefit if the company performs well and the stock price goes up. This gives management an incentive to aim for long-term growth and success, which ultimately benefits the stockholders. The other options may not be as effective in ensuring that management decisions are in the best interest of the stockholders.

One Way Often Used to Insure That Management Decisions Are