Which of the following is a common reward in variable executive compensation agreements?

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Question: Which of the following is a common reward in variable executive compensation agreements?

Option A: Fixed salary
Reasoning: A fixed salary is a base pay component and does not vary with performance. Variable executive compensation is designed to align incentives with company outcomes, so a fixed salary is not characteristic of a variable reward structure.

Option B: Employee stock options (ESOs)
Reasoning: Employee stock options are a classic component of variable compensation for executives. They tie pay to the company’s stock performance and long-term value, aligning executive interests with shareholders. This makes ESOs a common reward in variable compensation schemes.

Option C: Office allowances
Reasoning: Office allowances are typically routine benefits or perks, not performance-based rewards. They do not reflect performance or company results and are not central to a variable compensation framework.

Option D: Retirement contributions
Reasoning: Retirement contributions are a long-term benefit or savings plan. While important, they are generally not part of the variable, performance-based portion of compensation and do not directly incentivize short-term results like variable pay does.

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Which of the following is a common reward in variable executive compensation agreements?

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