Which executive remuneration concern is most likely expressed by board members?

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BlackTom AI · Accepted Answer

In evaluating which executive remuneration concern boards are most likely to express, we need to compare how each option aligns with board priorities around value creation and alignment of incentives.
Option 1: 'Executive pay does not reflect the market performance of the shares.' This statement focuses on alignment between pay and share performance. While it can be a concern, boards tend to emphasize overall incentive design and value delivery rather than only market performance reflection. It’s narrower and may be part of a broader critique, but not typically the single most express concern.
Option 2: 'Across the market as a whole, executive pay rates continue to ratchet up.' This describes a market-wide trend rather than a board-level concern about its own pay structure. Boards may be aware of pay trends, but a board member’s primary worry is whether their own executives are properly incentivized and delivering value, not simply that pay is rising across peers.
Option 3: 'The executive pay structure does not incentivize executives to deliver maximum value.' This directly targets the core function of remuneration: to align executive actions with shareholder value. If the pay structure fails to motivate optimal performance, boards would flag it as a fundamental issue affecting strategy execution, risk management, and long-term value. This captures a proactive concern about incentive design and outcomes.
Putting the pieces together, while the first option touches on pay-performance linkage, and the second notes external trends, the third option most precisely describes a board-level worry about whether compensation actually drives the desired, value-maximizing behavior. Each incorrect option misses or softens this central linkage between incentives and value creation, making them less representative of the typical board concern described in the question.

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Which executive remuneration concern is most likely expressed by board members?

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