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Principle: The executive in a given company whose compensation package is determined by advice of an external consultant is likely to be overcompensated if the consultant also has business interests with the company the executive manages.
4.
Which one of the following judgments conforms most closely to the principle stated above?
a
The president of the Troskco Corporation is definitely overpaid, since he receives in salary and benefits almost 40 times more than the average employee of Troskco receives.
b
The president of the Troskco Corporation is probably overpaid, since his total annual compensation package was determined five years ago, when the company's profits were at an all-time high.
c
The president of the Troskco Corporation is probably not overpaid, since his total compensation package was determined by the Troskco board of directors without retaining the services of an external compensation consultant.
d
The president of Troskco Corporation is probably overpaid, since the Troskco board of directors determined his compensation by following the advice of an external consultant who has many other contracts with Troskco.
e
The president of Troskco Corporation is definitely not overpaid, since the external consultant the board of directors retained to advise on executive salaries has no other contracts with Troskco.