One way often used to insure that management decisions are in the best interest of the stockholders is to
A) threaten to fire managers who are seen as not performing adequately.
B) remove management's perquisites.
C) tie management compensation to the performance of the company's common stock price.
D) tie management compensation to the level of earnings per share.

Question

Quizplus · Accepted Answer

Tying management compensation to the performance of the company's common stock price incentivizes managers to make decisions that will increase the value of the company and therefore benefit the stockholders. This aligns the interests of the managers with the interests of the stockholders, as they both stand to gain from a successful company.

One Way Often Used to Insure That Management Decisions Are