Executive Compensation and Corporate Governance

In recent years, the issue of executive compensation has come under increased scrutiny, especially regarding its alignment with shareholder interests. ABC Corporation has a compensation structure that involves a combination of base salary, annual cash bonuses, and long-term equity incentives tied to the company's performance metrics, such as earnings before interest, taxes, depreciation, and amortization (EBITDA) growth and total shareholder return (TSR) relative to its industry peers.

During the annual shareholder meeting, a shareholder raised concerns about the disconnect between the CEO's substantial equity compensation and the company's stagnating stock price over the past three years. The CEO defended this structure by stating that it incentivizes management to focus on long-term performance rather than short-term gains.

Given the context of corporate governance best practices, which statement about ABC Corporation's executive compensation strategy is the most accurate?