One way to mitigate agency problems is to include shares of company stock in executive compensation packages.
Question: One way to mitigate agency problems is to include shares of company stock in executive compensation packages.
This creates an alignment between the company's interests and the interests of the executive, as they benefit when the company succeeds without any need for overextended oversight. Companies may also adopt an independent board of directors to oversee executive decisions, or compensation committees to evaluate executive remuneration and the related incentives. Profit-sharing and other performance-based compensation plans can also help to ensure executives are incentivized to focus on long-term value creation. Finally, ethical guidelines and codes of conduct can help ensure that executives are held accountable for their decisions.
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