Which of the following statements is FALSE? By tying compensation to performance, shareholders aim to prevent/reduce agency problems. Increasing the pay-for-performance sensitivity comes with the added benefit of reducing manager's risk. During the 1990s, most companies adopted compensation policies that more directly gave managers an ownership stake by including grants of stock or stock options to executives. Stock and option grants give managers an incentive to increase the stock price to make their stock or options as valuable as possible.
Which of the following statements is FALSE? By tying compensation to performance, shareholders aim to prevent/reduce agency problems. Increasing the pay-for-performance sensitivity comes with the added benefit of reducing manager's risk. During the 1990s, most companies adopted compensation policies that more directly gave managers an ownership stake by including grants of stock or stock options to executives. Stock and option grants give managers an incentive to increase the stock price to make their stock or options as valuable as possible.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Which of the following statements is FALSE?
By tying compensation to performance, shareholders aim to prevent/reduce agency problems.
Increasing the pay-for-performance sensitivity comes with the added benefit of reducing manager's risk.
During the 1990s, most companies adopted compensation policies that more directly gave managers an
ownership stake by including grants of stock or stock options to executives.
Stock and option grants give managers an incentive to increase the stock price to make their stock or options as
valuable as possible.
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