Economics

Question1: High CEO Effort; Expected shareholders rank = $1,000,000,000(0.3) + $800,000,000(0.4) + $500,000,000(0.3) = $770,000,000 first base CEO Effort; Expected shareholders set = $800,000,000(0.3) + $500,000,000(0.4) + $300,000,000(0.3) = $530,000,000 Improved shareholders value due to high CEO lather; Amount expenditure to shareholder for high CEO = $770,000,000 - $530,000,000 = $240,000,000 Question 2: compensation of bonus should be establish on 1% of the good from high CEO effort Bonus to CEO = $240,000,000 X 1% = $2,400,000 To ensure highest shareholders value, the performance level triggering this bonus should be $1,000,000,000 The price per share = $1,000,000,000 / 10,000,000 = $100 Elicit high CEO effort, if or when strength peril occurs, pay bonus when shareholders value > $800,000,000: Criticisms: a)It is tough to distinguish whether the company is experiencing high CEO effort with medium jeopardy or the company is experiencing low CEO effort with good stack of the company as both set out the same shareholder value. b)The effort of the CEO is unmeasured and the luck of the company is difficult to measure.

c)The CEO has the ability to directly or indirectly control the exposure of the company to the luck experienced. For example, although the sedulousness is experiencing good luck, but due to the company directions taken by CEO, the company might just experience medium luck only. d)It is difficult to predict the expected shareholder value based on luck. For example, during the medium luck, the company might have a potential to generate a higher shareholder value but since the target of $800,000,000 already achieved, the CEO might precipitate the efforts or postpone the opportunity to next year. Question 3: Elicit high CEO effort, if or when good luck occurs, pay bonus when shareholders value > $1,000,000,000: Criticisms: a)The effort of the CEO is immeasurable and the luck of the company... If you want to get a full essay, instal it on our website: Ordercustompaper.com

If you want to get a full essay, wisit our page: write my paper