Explicit employment contracts are more likely to be used by companies while hiring CEOs when_____.
A) the CEO was promoted from within the company instead of being hired from outside
B) the CEO has served a number of years on the company's board of directors
C) the company environment and employment situation was risky for the CEO because of uncertainty
D) the CEO received lesser-than-normal compensation, much of which constituted the basic fixed pay

Question

Quizplus · Accepted Answer

Explicit employment contracts are more likely to be used in risky situations where there is uncertainty. Hiring a new CEO can be risky for a company, especially if they are an external hire, and therefore an explicit employment contract may be used to mitigate those risks. Options A, B, and D do not necessarily indicate a need for an explicit employment contract.

Explicit Employment Contracts Are More Likely to Be Used by Companies