If Executives Were Paid Based on Relative Performance

question 195

Multiple Choice

If executives were paid based on relative performance:

• A) compensation would largely be based on luck.
• B) there would be less volatility in executive pay.
• C) stockholders would find it more difficult to monitor how much the executives are being paid.
• D) executives would have less incentive to work hard since ability risk is now high.

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Definitions:

Indorses

A party who transfers their rights in a negotiable instrument to another party by signing the back of the instrument.

Honor the Check

When a bank accepts and processes a check for payment from the account of the payer, ensuring the transfer of the stated amount to the payee.

Warranty Liability

Legal obligation arising from warranty promises that ensure a product or service meets certain standards and conditions.

Negotiable Instruments

Written documents guaranteeing the payment of a specific amount of money, either on demand or at a set time, which can be transferred by endorsement.