CAS Exam 9 Spring 2014, Question 17
Study guide: Exam 9
The board of directors for a company is deciding between two incentive plans for the company's management:
- Stock options
- Direct ownership of shares
Part a (1 point)
Discuss how the board's decision might impact the company's focus on risk management.
Part b (0.75 points)
Explain which plan better aligns management incentives with the interest of shareholders if the company is already in the midst of severe financial distress but not yet in bankruptcy.
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