When Managers of a Firm Are Compensated in Options,managements Interests

question 36

Multiple Choice

When managers of a firm are compensated in options,managements interests may not be aligned with that of shareholders because

• A) managers may have incentives to increase the riskiness of the firm.
• B) managers would rather be paid in cash.
• C) the taxes that are paid on the option compensation buffer that form of compensation from being aligned with the shareholders interests.
• D) none of the above.

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Definitions:

Average Salary

The mean income calculated by dividing the total salary of a group by the number of individuals in that group.

Increased

A term describing something that has become larger or greater in size, amount, or degree.

Decreased

Reduced or lessened in amount, size, strength, or intensity.

Legal Investigations

The process of gathering facts and evidence to ascertain the truth for legal proceedings.