Long-term incentives facilitate a Board of Directors' pay-related decisions designed to avoid potential agency problems by linking managerial compensation to the wealth of common shareholders.

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Long-term incentives, such as stock options or restricted stock units, tie executive pay to the company's future success and encourage managers to make decisions that will benefit the company's long-term performance, rather than focusing on short-term gains to boost their own compensation. This helps align the interests of executives with those of the shareholders and reduces the potential for agency problems between the management and the owners. As a result, long-term incentives are often used by boards of directors to make pay-related decisions that serve the best interests of the shareholders.

Long-Term Incentives Facilitate a Board of Directors' Pay-Related Decisions Designed