Executive pay based on relative performance ties compensation more closely to the effort and ability of the executive than pay schemes that are tied to the firm's stock price.

Question

Quizplus · Accepted Answer

Executive pay based on relative performance compares the performance of the executive to those of similar firms, rather than being solely dependent on the firm's stock price. This makes it more closely tied to the effort and ability of the executive.

Executive Pay Based on Relative Performance Ties Compensation More Closely