hinsafdar

Which of the following statements regarding management compensation is most accurate?

A) Both bonuses and stock-based compensation largely reward a manager’s short-term efforts.

B) Bonuses largely reward a manager’s long-term efforts whereas stock-based compensation reflects more of the manager’s short-term efforts.

C) Bonuses largely reward a manager’s short-term efforts whereas stock-based compensation reflects more of the manager’s long-term efforts.

---

Bonuses and stock-based compensation complement one another in the executive compensation package. They both serve different purposes. Bonuses, based on accounting figures, largely reward a manager’s short-term efforts whereas stock-based compensation reflects more of the manager’s long-term efforts.

hinsafdar

Which of the following statements regarding corporate governance is least accurate?

A) Managers use accounting manipulations to their benefit.

B) The cross holding of shares in Asia has enabled managers to more effectively thwart takeovers.

C) Shareholders would prefer managers reject hostile takeovers.

---

Managers may engage in entrenchment strategies to keep their jobs. As an example, managers may resist hostile takeovers that would result in the loss of their job, even when the takeover would benefit shareholders. Most hostile takeovers benefit shareholders because a higher price is received for their stock in the takeover.

hinsafdar

Which of the following statements regarding inadequacies in corporate governance is least accurate?

A) Stock prices often drop when investments are announced.

B) Shareholders are often ignorant of managerial compensation details.

C) If managers were paid using stock-based compensation, the level of executive pay could be reduced.

---

The level of managerial compensation has grown beyond what many consider reasonable. However, this growth is partly due to performance-based compensation. The higher the performance, the greater the payoff from stock and stock option compensation. Stock prices often drop when investments are announced because managers often misuse funds in value wasting projects.