Shareholders rely on CEOs to adopt policies and strategies that maximize the value of their shares. To motivate CEOs to maximize the value of their companies, boards of directors can consider all of the following options except one. Which one is it?
A)Boards can require that the CEOs become substantial owners of company stock.
B)Salaries, bonuses, and stock options can be structures to provide rewards for superior performance.
C)Salaries can be structured to provide penalties for poor performance.
D)Dismissal for poor performance is not an option.

Question

Quizplus · Accepted Answer

Shareholders rely on CEOs to adopt policies and strategies that maximize the value of their shares. A combination of three basic policies may create the right monetary incentives for CEOs to maximize the value of their companies: Boards can require that the CEOs become substantial owners of company stock; salaries, bonuses, and stock options can be structured so as to provide rewards for superior performance and penalties for poor performance; dismissal for poor performance should be a realistic threat.

Shareholders Rely on CEOs to Adopt Policies and Strategies That