When Designing an Incentive Contract

question 46

Multiple Choice

When designing an incentive contract,

• A)it is important for the board of directors to set up an independent compensation committee that can carefully design the contract and diligently monitor manager's actions.
• B)senior executives can be trusted to not abuse incentive contracts by artificially manipulating accounting numbers since the auditors should look in to that.
• C)the presence of any incentive is enough,whether it is accounting based or stock-price based.
• D)the board of directors should always give the managers a "heads I win,tails you lose" type of option.

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Definitions:

Pesticide-Resistant

Refers to pests that have developed a resistance to pesticides through genetic mutation or adaptation, reducing the effectiveness of the pesticides.

Pest-Resistant

A characteristic of plants that have the ability to withstand or repel attacks from pests, reducing the need for chemical pesticides.

Gene Flow

The movement of alleles between local populations due to the migration of individuals; can have significant evolutionary consequences.

Herbicide-Tolerant Weeds

Weeds that have developed resistance to herbicides, making them difficult to control in agricultural settings.