problem with tying executive pay to stock prices isthat:
A)many factors other than executive effort and ability affect stock prices.
B)executives can manipulate stock prices.
C)it is a complicated evaluation to make, riddled with strong assumptions.
D)executives prefer more straightforward compensation schemes that reduce their risk.

Question

Quizplus · Accepted Answer

Tying executive pay to stock prices can be problematic because stock prices are subject to many factors beyond the control of executives, such as market trends, economic conditions, and even unexpected events like natural disasters or political upheavals. Therefore, it may not be fair or accurate to attribute changes in stock prices solely to executives' efforts or abilities. Additionally, executives may be tempted to manipulate stock prices through unethical or illegal means, such as insider trading or false reporting, in order to inflate their own compensation. Furthermore, evaluating the relationship between executive performance and stock prices involves complex calculations and assumptions, which may not always be accurate or transparent. For these reasons, executives may prefer more straightforward compensation schemes that offer more predictable rewards, rather than tying their pay to volatile and unpredictable stock prices.

Problem with Tying Executive Pay to Stock Prices Isthat