SpandoCorp Is a Diversified Firm That Makes Industrial, Military and Consumer

Multiple Choice

SpandoCorp is a diversified firm that makes industrial, military and consumer products from Spandex. SpandoCorp manages each of the businesses that it operates in as a separate division and treats each as a True profit-and-loss center. In this organization, Grace McKenna is responsible for deciding which set of businesses SpandoCorp will operate in and for encouraging behavior that is consistent with this strategy, Wells Tucker provides information to McKenna about the internal and external environments that she uses in her decision making, and Kelly Rae is one of the individuals who is responsible for evaluating the firm's decision making to ensure that it is consistent with the interests of equity holders.
-If SpandoCorp's board of directors wanted to ensure that changes in the CEO's compensation would be closely linked to changes in the firm's performance, it should

A) use a compensation package that includes only a salary for the CEO.
B) use a compensation package that includes a salary and a cash bonus for the CEO.
C) use a compensation package the includes a salary, a cash bonus and stock options that represent only a relatively small percentage of the CEO's total compensation package.
D) use a compensation package that includes a salary and stock options that represent a relatively substantial percentage of the CEO's total compensation package.