Question: CEO compensation is a controversial topic. In theory, pay packages should be designed by boards to maximize value on behalf of shareholders. However, many empirical

CEO compensation is a controversial topic. In theory, pay packages should be designed by boards to maximize value on behalf of shareholders. However, many empirical facts may appear inconsistent with optimal contracting. Critically discuss the three main purposes of executive compensation and the two different views of how executive compensation should be set.

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Three Main Purposes of Executive Compensation Incentive Alignment Purpose To align the interests of executives with those of shareholders by motivating executives to work towards maximizing the compan... View full answer

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