Question

Company manager would be more encouraged to make decisions that one in the best interest of shareholders if their compensation was like to

1 the company net profit figure

2 the company shares price

3 the company sale figure

4 customers satisfaction

Select one

Answer 1

Answer. (2) The Company Shares Price.

In any organization, top managers such as CEO (other C level executives), General Managers and Departmental heads should be paid fairly to motivate and encourage them to make decisions that improve and enhance shareholder value and organizational productivity. One of the best ways to align shareholders' goals with the manager's goals by providing them the best compensation and this can be done by providing them stock options in the organization. When the performance of the managers are linked with the stock price, the managers would give their best to improve share prices of the organization by making productive and proper decisions that are sync with the interest of the shareholders and organization.