Golden handcuffs:
A) Have no downside risk to executives, who always profits unlike other shareholders
B) Have a weak correlation between earnings measures and shareholder wealth creation
C) Make it hard to explain the dimensions of managerial performance using the movement in share price
D) May promote risk-averse decision making due to the downside risk borne by the executive

Question

Quizplus · Accepted Answer

Golden handcuffs can create a situation where executives become risk-averse because they do not want to lose the benefits provided by the incentives. This can lead to them making decisions that prioritize short-term stability over long-term growth or taking risks that could benefit the company but may negatively impact their personal finances.

Golden Handcuffs