An efficiently functioning internal labour market rewards the CEO for:
A)the company's stock-price performance.
B)firm-specific human capital only.
C)general human capital only.
D)firm-specific and general human capital.

Question

Quizplus · Accepted Answer

An efficiently functioning internal labour market rewards the CEO for both firm-specific and general human capital. This means that the CEO is not only rewarded for their specific skills that apply to the company but also for their overall skills and knowledge that could be transferred to other companies. This helps to incentivize CEOs to continuously develop their skills and knowledge, which can be beneficial for the company in the long run. On the other hand, rewarding the CEO solely based on the company's stock-price performance (A) can lead to short-term decision-making and neglecting long-term goals. Similarly, rewarding only for firm-specific (B) or general human capital (C) could lead to underdevelopment in either area, potentially limiting the CEO's ability to contribute to the company's success. An efficiently functioning internal labour market rewards the CEO for both firm-specific and general human capital. Firm-specific human capital refers to the knowledge, skills, and experience that are specific to a particular company or industry, while general human capital refers to the more transferable skills and knowledge that can be applied across different companies and industries. A CEO who is able to develop and demonstrate both types of human capital within the company will be more valuable to the organisation and therefore be rewarded accordingly. The company's stock price performance (A) may be one factor taken into consideration, but it is not the only one.

An Efficiently Functioning Internal Labour Market Rewards the CEO For