Chapter 1, Problem 12Q

Summary Introduction

To identify: The factors that the committee must consider while setting the CEO’s compensation. Whether the compensation must be of dollar or stock or both. The way to measure the performance. The actions of Person X if he is the vice president of some other company.

Compensation Package: The compensation package of the manager should be attractive which inspire them to perform actively. If the compensation package is good, the manager will focus on the maximization of stockholders value. The compensation package should be fair.