To protect shareholders from excessive compensation practices, executive compensation packages are best set by
A) The managing director
B) A committee of primarily outside members of the board of directors
C) A committee of top management employees
D) The complete board of directors

Question

Quizplus · Accepted Answer

A committee of primarily outside members of the board of directors is the best choice for setting executive compensation packages. This is because outside members are less likely to have personal or professional relationships with the executives and therefore can provide a more objective perspective in determining appropriate compensation. Additionally, having a committee with a mix of backgrounds and expertise can ensure that compensation decisions consider a range of factors including company performance, market trends, and industry standards.

To Protect Shareholders from Excessive Compensation Practices, Executive Compensation Packages