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1. If a company’s board of directors wants management to maximize shareholder wealth, should the CEO’s...

1. If a company’s board of directors wants management to maximize shareholder wealth, should the CEO’s compensation be set as a fixed dollar amount, or should the compensation depend on how well the firm performs (that is, the company's performance)?

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Answer #1

In my opinion compensation should depend on how well the firm performs (that is, the company's performance).If the performance of CEO is linked with the compensation,then he will be motivated to perform better day by day and ultimately firm will perform better.The compensation packages should be sufficient to attract and retain the CEO but not go beyond what is needed.Compensation should be structured so that the CEO is rewarded on the basis of sock's performance over the long run.

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