Shareholders Rely on CEOs to Adopt Policies and Strategies That

question 19

Multiple Choice

Shareholders rely on CEOs to adopt policies and strategies that maximize the value of their shares. To motivate CEOs to maximize the value of their companies, boards of directors can consider all of the following options except one. Which one is it?

• A)Boards can require that the CEOs become substantial owners of company stock.
• B)Salaries, bonuses, and stock options can be structures to provide rewards for superior performance.
• C)Salaries can be structured to provide penalties for poor performance.
• D)Dismissal for poor performance is not an option.

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Definitions:

Reasonable Expenses

Costs that are deemed necessary and appropriate under given circumstances, often in a legal or business context.

Junior Lienholders

Creditors who have claims on a property that are ranked below other debts in terms of repayment priority in case of default.

Collateral

A form of security provided by the borrower to the lender, consisting of property or assets, that can be taken possession of should the borrower fail to repay the loan.

Unconscionability

describes a situation where a contract or clause is so unfair to one party that no reasonable or informed person would agree to it.