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

question 40

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:

Intelligence

Traditionally seen as reasoning ability, as measured by standardized tests.

Rewarding

Pertains to providing positive reinforcement or advantages as a result of someone's actions or behavior, enhancing motivation.

Challenging

Presenting difficulty or testing someone's abilities or determination in a way that is stimulating and engaging.

Creative Atmosphere

An environment or culture that nurtures innovation, open-mindedness, and the free flow of ideas, supporting creativity.