Paulo Owns a Few Shares of Stock in a Large

question 85

Multiple Choice

Paulo owns a few shares of stock in a large and diversified firm. He realizes that the CEO of the company is responsible for a multi-billion dollar business, but is upset with what he feels is excessive compensation for the chief executive officer, particularly since the firm has reported losses for the past two years. Paulo's concerns are:

• A)unfounded, since laws in the United States prevent firms from paying large salaries or bonuses to executives when a firm reports a loss.
• B) based on an erroneous conclusion, because CEO pay is always based on a formula tied to the company's profits and losses.
• C)likely to be well-founded since CEO compensation at many U.S. companies has actually increased even when the company performed poorly.
• D)not entirely unfounded, but he needs to realize that the pay received by most chief executives must be reinvested in the company if it's unprofitable for three years in a row.

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Definitions:

Status Position

The rank or standing of an individual or group within a societal or organizational hierarchy.

Group Cohesion

A property of a group, specifically the degree to which members of a group desire to remain in that group and resist leaving it. A highly cohesive group will maintain a firm hold over its members’ time, energy, loyalty, and commitment.

Task Cohesion

Task cohesion refers to the level of unity and commitment among members of a group or team towards achieving a common goal.

Social Cohesion

The bonds or "glue" that bring people together in society, fostering a sense of belonging and mutual support.