Which is false regarding compensation policies

- While decreasing managers' risk exposure, increasing the sensitivity of managerial pay and wealth to firm performance does have some negative effects.

- The substantial use of stock and option grants in the 1990s greatly increased managers' payforperformance sensitivity.

- In the absence of monitoring, the other way the conflict of interest between managers and owners can be mitigated is by closely aligning their interests through the managers' compensation policy.

- The optimal level of sensitivity of managers' compensation to the performance of their firms depends on the managers' level of risk aversion, which is hard to measure.