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Question
The Board of Directors of CamCell, Inc., wishes to design a CEO compensation plan that will align the personal interests of the CEO with the interests of the shareholders in long-term firm performance. The Board wishes the CEO to take more short-term risks in order to achieve potentially higher long-term returns. Consequently, the Board has decided on an incentive plan that involves payout based on the firm's performance five years in the future. CamCell is presently searching for a new CEO. Which of the following statements is true?
a. This plan will be very attractive in luring candidates for the CEO position.
b. CamCell may have to over-compensate its CEO in order to offset the personal risk a CEO would undertake under this plan.
c. Institutional investors disapprove of long-term executive incentive plans and they may sell their blocks of stock in CamCell.
d. This type of plan is likely to cause the CEO to underinvest in R&D in order to boost CamCell's long-term profitability.
Answer
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Related questions
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a. True
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