Given a Series of Contracts Offered to an Executive Having

question 13

Multiple Choice

Given a series of contracts offered to an executive having the same slope (where slope refers to how the contract varies with changes in the firm's gross profits) but different intercepts (referring to the overall generosity of the contract) . Which of these is not a consideration in figuring out which of these intercepts the shareholders would decide to build into the contract offered to the executive?

• A)if too generous a contract is offered,this comes out of the firm's bottom-line profit.
• B)if too generous a contract is offered,the executive may become lazy and not exert the required effort.
• C)if the contract isn't generous enough,the executive will decide to work elsewhere.
• D)if the contract isn't generous enough,only low-ability executives will apply.

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Definitions:

Disjunctive

describes a relationship or situation where elements are not connected or do not flow logically from one to another.

Ambivalent

Describes mixed feelings or contradictory attitudes towards a person, situation, or object.

Openness

A personality trait describing someone as curious, imaginative, creative, adventurous, and inventive.

Big Five Personality Traits

Five personality traits that psychologists describe as constituting the major attributes of one’s personality: extraversion, agreeableness, conscientiousness, neuroticism, and openness.