Why are incentive compensation plans often criticized?
A)managers may take actions to improve short-run performance only.
B)managers may take actions to improve long-run performance only.
C)stock options affect market prices.
D)they are ineffective in motivating managers.

Question

Quizplus · Accepted Answer

Incentive compensation plans are often criticized because managers may only take actions to improve short-term performance and ignore long-term goals. This can lead to unethical behavior, such as manipulating financial statements or cutting back on investments that benefit long-term growth. Additionally, some argue that incentive plans can encourage excessive risk-taking, as managers may prioritize their own financial gain over the organization's long-term success. Overall, incentive plans can be effective, but they must be designed and implemented carefully to avoid unintended consequences.

Why Are Incentive Compensation Plans Often Criticized