The board of directors of Clementine Minerals and Mining (CMM) has been challenged by shareholders about the total compensation of the CEO. In order to examine whether the CEO's pay is reasonable, the board of directors is addressing all of the following questions but one. Which question has it most likely chosen to ignore?
A)Would another company hire this CEO?
B)How does the CEO's compensation compare with that of CEOs in other companies in the same industry?
C)What would an investor pay for the CEO's level of performance?
D)Is the CEO's pay more than 20 times higher than the pay of the average employee at CMM?

Question

Quizplus · Accepted Answer

The other three questions are commonly used to determine if a CEO's compensation is reasonable. However, the question about the CEO's pay compared to the average employee's pay at CMM is often ignored by boards of directors, even though it is a critical question when it comes to questions of fairness and equity within the company.

The Board of Directors of Clementine Minerals and Mining (CMM)