What Happens When a Company Ties Manager Compensation to the Company's

question 66

Multiple Choice

What happens when a company ties manager compensation to the company's stock performance?

• A)It creates a significant amount of risk because of a lack of diversity since the performance indicator is based on just one stock - that of the company.
• B)It has the risk that a company's stock can fluctuate widely based on factors over which the manager has no control.
• C)It is accomplished through issuing stock options which shields some of risk.
• D)All of the answers are correct.

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Definitions:

Consumption

The use of goods and services by households, which is a primary component of the economy and influences economic growth.

Induced Consumption

Refers to the portion of consumer spending that increases or decreases with disposable income.

Disposable Income

Net funds allocated to households for their spending and saving post the application of income taxes.

Consumption

Consumption is the act of using goods and services by households or individuals.