The Board of Directors of CamCell, Inc

question 86

Multiple Choice

The board of directors of CamCell, Inc., wishes to design a CEO compensation plan that will align the personal interests of the CEO with the interests of the shareholders in long-term firm performance.The board wishes the CEO to take more short-term risks in order to achieve potentially higher long-term returns.Consequently, the board has decided on an incentive plan that involves payout based on the firm's performance five years in the future.CamCell is presently searching for a new CEO.Which of the following statements is true?

• A) This plan will be very attractive in luring candidates for the CEO position.
• B) CamCell may have to over-compensate its CEO in order to offset the personal risk a CEO would undertake under this plan.
• C) Institutional investors disapprove of long-term executive incentive plans and they may sell their blocks of stock in CamCell.
• D) This type of plan is likely to cause the CEO to underinvest in R&D in order to boost CamCell's long-term profitability.

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Definitions:

Tracheids

Long, thin cells in the xylem of vascular plants that help in the transport of water and minerals, and also provide support.

Pits

Small depressions or cavities on a surface or in a structure, often found in fruits or in the landscape.

Perforation Plates

Structures found in the water-conducting vessels of some plants, containing large pores that allow water to flow from one vessel element to another.

Sieve Plates

Specialized structures found in the phloem of plants that facilitate the flow of nutrients by containing pores through which sap can flow between cells.