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CFA Level 2
Corporate Finance

Executive Compensation Structure and Shareholder Interests

Very Hard Corporate Governance Executive Compensation

Company XYZ has recently faced criticism from shareholders regarding its executive compensation structure. The board of directors decided to implement a new bonus plan that ties executive bonuses to three key performance indicators (KPIs): revenue growth, profit margin, and stock performance relative to a peer group. Moreover, the plan stipulates that bonuses will be paid only if the company meets or exceeds the 70th percentile in its peer group performance scores.

Given this context, which of the following statements best describes a potential benefit of this executive compensation structure?

Hint

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% Correct88%