Question

Which of the following is NOT an advantage of effective compensation such as stock option grant?...

Which of the following is NOT an advantage of effective compensation such as stock option grant?

Select one:

a. it motivates employees to work for maximizing shareholder value

b. it is a compensation based on performance

c. it always increases the market price of the stock

d. it helps retain executives and recruit new talent

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Answer #1

Effective compensation such as stock option grant will not be always increasing the market price of the stock because market price of the stock is related to performance of the company and sentiments of the market participants about the company so it is not about effective compensation such as stock option grant as stock option grant does not guarantee an increase in the market price.

All the other options are correct because it will motivate employees to maximize shareholder value and it is a compensation based on the performance and it also helps in retention of the old executive and recruitment of new talent.

Correct answer will be option(C) It always increases the market price of the stock

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