XYZ Pharmaceuticals recently announced that the clinical trials for a cancer drug failed to cure the illness.This announcement led to a dramatic decrease in the stock value of the company.The company hired a new CEO two years ago when the clinical trials for this drug had already initiated.Which one of the following is true about the compensation of the CEO of XYZ Pharmaceuticals?
A)The CEO should receive lower compensation since shareholder returns have been declining.
B)The CEO was not involved in the decision of the failed initiative; therefore he/she should not receive lower compensation.
C)Each company handles this situation differently.
D)The compensation of this CEO depends only on pretax profit margins.

Question

Quizplus · Accepted Answer

Each company has its own policies and performance metrics for determining CEO compensation, which can include a variety of factors beyond the success or failure of specific initiatives.

XYZ Pharmaceuticals Recently Announced That the Clinical Trials for a Cancer