Which of the following is considered a long-term incentive for managers and executives?
A. Share of a profit-sharing plan
B. Stock or stock options
C. Retention bonuses
D. Annual incentive plans
E. Discretionary bonuses
Answer (2)
Among the options, stock or stock options are the only true long-term incentives for managers and executives, as they align their interests with the shareholders over an extended period. Other options such as profit-sharing, retention bonuses, annual incentives, and discretionary bonuses tend to focus more on short-term performance. Thus, stock options encourage strategic, long-term decision-making. ;
The correct answer is B. Stock or stock options as they are designed to align the interests of executives with the long-term performance of the company. Other options like profit-sharing and annual incentive plans focus on short-term achievements. Therefore, stock options encourage executives to make decisions that benefit the company over time.
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