One problem with compensation systems is that
A)sometimes a manager is rewarded for an objective other than maximizing profits.
B)managers are often paid too much.
C)owners sometimes want to pursue social objectives.
D)the Dodd-Frank Act of 2010 requires shareholder votes on compensation that are non-binding.

Question

Quizplus · Accepted Answer

Compensation systems may be designed to incentivize a manager to achieve a specific objective, such as increasing revenue, rather than maximizing profits. This can lead to managers prioritizing short-term gains over long-term growth, which can ultimately harm the company's profitability. Additionally, compensation based on subjective performance evaluations may not accurately reflect a manager's contributions to the company.

One Problem with Compensation Systems Is That