A Disadvantage of Using Stock Options to Compensate Managers Is

question 47

Multiple Choice

A disadvantage of using stock options to compensate managers is that

• A)it encourages mangers to undertake projects that will increase stock price.
• B)it encourages managers to engage in empire building.
• C)it can create an incentive for mangers to manipulate information to prop up a stock price temporarily, giving them a chance to cash out before the price returns to a level reflective of the firm's true prospects.
• D)all of the above.
• E)none of the above.

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Definitions:

Exaggerated Level

An overemphasized or disproportionately high degree of intensity, importance, or quantity.

Self-Esteem

An individual's overall subjective emotional evaluation of their own worth.

Narcissistic

Relating to narcissism, a condition characterized by a preoccupation with oneself and a lack of empathy for others.

Low Self-Esteem

A personal feeling of worthlessness or a lack of confidence in one's own abilities or value.