Under PAT,a Firm Is Aware That Managers Are Likely to Behave

question 24

Multiple Choice

Under PAT,a firm is aware that managers are likely to behave rationally.Which of the following mechanisms will be the appropriate course of action for shareholders to price protect against self interested managers?

• A) compensate managers at a fixed rate;
• B) compensate managers at a fixed rate plus bonus on the basis of performance;
• C) compensate managers at a fixed rate with extra perquisites;
• D) include debt covenants in the management compensation contract;
• E) None of the given Answers.