Executive Compensation and Shareholder Interests

Very Hard Corporate Governance Executive Compensation

Company X recently restructured its executive compensation package in response to shareholder activism regarding excessive pay. The new package includes a combination of cash bonuses and equity-based incentives tied to long-term performance metrics. Shareholders are concerned about the potential misalignment between executive incentives and shareholder interests arising from this new structure. As a CFA charterholder, which of the following statements best describes the prospective issues with the revised executive compensation plan?

The revised compensation plan may encourage executives to focus on short-term stock performance at the expense of long-term sustainability.

Equity-based incentives tied solely to stock price may mitigate risks of executive misalignment with shareholder interests.

The introduction of cash bonuses without any performance metrics provides better alignment with shareholder values.

Hint

Submitted9.9K

Correct8.6K

% Correct87%