When executive pay is excessive relative to company performance, profits are diverted away from stockholders to the executives.

Name: When executive pay is excessive relative to company performance, profits are diverted away from stockholders to the executives.
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Question

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Excessive executive pay can reduce the profits available to stockholders, as a larger portion of the company's earnings is allocated to executive compensation rather than being distributed as dividends or reinvested for growth.

When Executive Pay Is Excessive Relative to Company Performance, Profits