Question: 5. The chart below represents a CEO compensation game. Please use this information to answer the following questions. If the corporation profitable Fair compensation. Excess

5. The chart below represents a CEO compensation game. Please use this information to answer the following questions.

  • If the corporation profitable

Fair compensation. Excess compensation

CEO received CEO received

$500,000 $20 million

  • If the corporation bankrupt

Fair compensation Excess compensation

CEO received CEO received

$500,000 $ 500,000

a.

As a compensation committee member (i.e. A member of the committee determining CEO

compensation), what is your preferred outcome?

b.

What are some of the consequences and costs not reflected in the table (Hint: Think about

transactions costs)?

c.

What could increase the likelihood of reaching the bottom left quadrant in this game (Please

explain)?

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