ICANBusiness, Management and FinanceLeadership and Motivation2022

Under the Companies and Allied Matters Act (CAMA) 2020, the Board of Directors of Emerald Resources Plc wishes to implement a long-term incentive plan for its executive directors to align their motivation with shareholder interests. Which of the following instruments is MOST appropriate for this purpose?

APayment of sitting allowances at each Board meeting
BGrant of share options exercisable after a three-year vesting periodCORRECT
CIncrease in directors' fixed monthly salaries by 20%
DPayment of ex-gratia bonuses approved by the Managing Director
AI
Toaster Teacher
Why the answer is B, and why the others tempt you.
Share option schemes with vesting periods align executive motivation with long-term shareholder value creation, as directors only benefit when the share price appreciates over time. CAMA 2020 recognises equity-based incentive arrangements for directors. Fixed salary increases and sitting allowances are short-term and do not align director interests with shareholder wealth maximisation.
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