Determine maximum amount worth to shareholders to elicit ceo

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Reference no: EM13107348

Determine the maximum amount it would be worth to shareholders to elicit high CEO effort all time rather than low CEO effort all the time?

If you make decision to pay 1% of this amount as cash bonus, what performance level (what share price or shareholder value) in table must trigger bonus? Assume you make decision to elicit high CEO effort when and if medium luck happens by paying bonus for $800 million outcomes. What criticism can you see with incentive contract plan?

Assume you make decision to elicit high CEO effort when and if good luck happens by paying bonus for $1 billion outcomes only. What criticism can you see with this incentive contract plan?

Assume you make decision to elicit high CEO effort when and if bad luck happens by paying bonus for $500 million outcomes. What criticism can you see with incentive contract plan?

Reference no: EM13107348

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