Answer to Question #196522 in Economics for esther amponsah

Question

A major Ghanaian company's typical CEO is 56-58 years old and gets paid GHS3-5 million per year. From a game-theory perspective, explain why corporate governance experts advise that such executives be required to hold common stock worth 7-10 years of total compensation.

Answer 1

If such executives are required to hold common stock worth 7-10 years of total compensation, then they will be interested in such managing the company, for which they can increase the value of the stocks they hold and receive the higher payoff.