Which one of the following means of management compensation is designed to help eliminate the agency problem?
A) Providing cost of living adjustments.
B) Increasing health care beneﬁts.
C) Offering stock options.
D) Providing annual raises.
E) Providing a corporate jet.

Question

Quizplus · Accepted Answer

Offering stock options aligns the interests of management with those of shareholders by incentivizing management to work towards increasing the value of the company's stock. This helps to reduce the agency problem where management may act in their own self-interest rather than in the best interest of shareholders.

Which One of the Following Means of Management Compensation Is