Understanding Executive Compensation with Stock Options

Very Easy Corporate Governance Executive Compensation

In a corporate setting, executive compensation is crucial for attracting and retaining talented leaders. It typically includes various forms of remuneration such as salaries, bonuses, stock options, and other benefits. Recent studies suggest that aligning executive compensation with company performance can enhance shareholder value. In this context, consider a company that rewards its executives primarily through stock options.

Which of the following statements regarding this compensation structure is most accurate?

Stock options primarily incentivize executives to focus on long-term corporate performance.

Stock options provide a guaranteed return to executives regardless of company performance.

Executives with stock options are less likely to take risks that could jeopardize the company.

Hint

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