Incentive Compensation. Salary and bonus payments tied to short-term performance often constitute a large part of the annual total compensation package earned by top management. Thus, top managers, like the chief executive officer (CEO), typically have huge personal incentives to turn in favorable year-to-year growth in revenues, profits and earnings per share. This can sometimes have the unfortunate effect of focusing managerial attention on near-term accounting performance to the detriment of long-term value maximization.
A. Explain some tools companies use to combat such myopic behavior.
B. Explain why a stock-option plan might be very appropriate for the CEO, but inappropriate for workers in general.

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The Answer of Incentive Compensation. Salary and bonus payments tied to short-term performance often constitute a large part of the annual total compensation package earned by top management. Thus, top managers, like the chief executive officer (CEO), typically have huge personal incentives to turn in favorable year-to-year growth in revenues, profits and earnings per share. This can sometimes have the unfortunate effect of focusing managerial attention on near-term accounting performance to the detriment of long-term value maximization.
A. Explain some tools companies use to combat such myopic behavior.
B. Explain why a stock-option plan might be very appropriate for the CEO, but inappropriate for workers in general.