How does linking executive pay to stock performance lead to unethical behavior?
A) Executives can use the advantage of knowing the company's inside information to buy or sell stock and create huge personal gains.
B) Executives can roll in the stock price into their base pay to avoid paying a huge tax.
C) Executives do not inflate the stock price in order to enjoy bonuses.
D) Executives can use the employee stock ownership plan to buy their company if it is experiencing financial problems.
E) The executives can obtain as many shares as they need at a price that is much lower than the market rate.

Question

Quizplus · Accepted Answer

Linking executive pay to stock performance creates an incentive for executives to manipulate the company's financial information and withhold important information from the public to boost the company's stock price. This can give executives an advantage in buying or selling stock and creating huge personal gains at the expense of the shareholders. This behavior is unethical and can be illegal if it involves insider trading.

How Does Linking Executive Pay to Stock Performance Lead to Unethical