Abstract
The components of chief executive officer (CEO) pay are numerous and complex. Top managers are hired to work in the shareholders’ interests, which are to maximize the wealth of the owners. But CEOs are human and are concerned in maximizing their own utility of wealth. This desire may run counter to the shareholders’ interests, resulting in agency costs. It appears that the complex manner in which a CEO is paid is designed to provide an incentive to the top manager to carry out the goals of stockholders and reduce agency problems.
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