Which of these is an advantage of rewarding senior executives with cash rather than with non-cash payments?
A) It helps to overcome the agency problem
B) It is likely to be preferred by a risk-averse executive
C) The lasting nature of cash
D) All of the above are advantages

Question

Quizplus · Accepted Answer

A is incorrect because cash payments may not necessarily overcome the agency problem, which is when there is a conflict of interest between the interests of senior executives and shareholders. Non-cash payments, such as stock options or equity, can incentivize executives to act in the best interests of shareholders. C is incorrect because the lasting nature of cash is not necessarily an advantage in terms of executive compensation. Inflation can reduce the value of cash over time, whereas non-cash payments may appreciate in value. B is the correct answer because cash payments are generally seen as less risky than non-cash payments, which can be affected by market volatility or fluctuations in the value of the underlying assets.

Which of These Is an Advantage of Rewarding Senior Executives