The board of directors of UT Wireless, Inc. is considering two compensation plans for the CEO of the company. The first would pay the CEO a salary of $300,000 for the upcoming year. The second would pay the CEO a salary of $150,000 and provide the CEO with a stock option to buy 100,000 shares of stock for $11 per share. The current price per share of UT Wireless, Inc. stock is $9 per share. The stock option expires at the end of the year. Why might shareholders prefer the second payment plan

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10-01-2022
Business

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The board of directors of UT Wireless, Inc. is considering two compensation plans for the CEO of the company. The first would pay the CEO a salary of $300,000 for the upcoming year. The second would pay the CEO a salary of $150,000 and provide the CEO with a stock option to buy 100,000 shares of stock for $11 per share. The current price per share of UT Wireless, Inc. stock is $9 per share. The stock option expires at the end of the year. Why might shareholders prefer the second payment plan

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ewomazinoade ewomazinoade · Answer 1 · 2022-01-14T12:57:44+01:00

Shareholders might prefer the second plan because some of the pay of the CEO is tied to the appreciation of the stock of UT Wireless. This would align the interest of the CEO to that of the shareholders.

A brief description of public companies.

A public company is usually owned by the shareholders but managed by managers. Shareholders usually acquire shares of the company to become owners. Managers are employed to run the company

Agency conflict

Due to the fact that owners of the company and the mangers are different people, a conflict of interest might arise. Th interest of shareholders and the managers might not be aligned.

One of the ways to reduce agency conflict, the pay of managers can be tied to the value of the stock of the company.

To learn more about conflict of interest, please check: https://brainly.com/question/14622937