Tying Executive Compensation to Stock Prices May Create Incentives For

question 178

Multiple Choice

Tying executive compensation to stock prices may create incentives for:

• A) CEOs to work harder and increase the profitability of the firm.
• B) CEOs to overstate the firm's financial status.
• C) Enron-type scandals.
• D) All of these possibilities are correct.

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Definitions:

Takings Clause

A provision in the Fifth Amendment of the U.S. Constitution that prevents the government from taking private property for public use without just compensation.

Just Compensation

The fair market value pay required by the government to be given to a property owner when the government takes private property for public use under the power of eminent domain.

Fifth Amendment

An amendment to the U.S. Constitution that provides several rights to individuals, including protection against self-incrimination and the guarantee of due process.

Fourteenth Amendments

An amendment to the US Constitution granting citizenship to all persons born or naturalized in the United States and guaranteeing all citizens equal protection under the law.