Executive compensation contracts seldom contain annual bonus and longer term pay components tied to financial statement results,but instead usually rely on stock options as a means to reward managers in a manner that is less subject to manipulation by management.

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This statement is incorrect. Many executive compensation contracts do include annual bonuses and longer term pay components tied to financial statement results in addition to stock options. The use of multiple performance measures and a mix of short-term and long-term incentives is common in executive compensation contracts. However, stock options are often a key component of these contracts due to their potential to align the interests of managers with those of shareholders.

Executive Compensation Contracts Seldom Contain Annual Bonus and Longer Term