Question

Which one of the following is most apt to align management's priorities with shareholders' interests?A. Compensating managers with shares of stock that must be held for 3 years before the shares can be soldB. Allowing a manager to decorate his or her own office once he or she has been in that office for a period of 3 years or moreC. Increasing the number of paid holidays that long-term employees are entitled to receiveD. Allowing employees to retire early with full retirement benefits

Answer 1

The correct answer is A) Compensating managers with shares of stock that must be held for 3 years before the shares can be sold.

The option that is most apt to align management's priorities with shareholders' interests is "Compensating managers with shares of stock that must be held for 3 years before the shares can be sold."

Compensation is one of the most important ways to motivate managers to be productive and deal with all kinds of investors. They have a big responsability managing the investor's portfolio so their work must be compensated proportionally. Money is not always the only way to offer interesting compensation. That is why stocks are included in the compensation package, such as the nonqualified stock options and incentive stock options.