Question

CEOs are hired to maximize the present value of the firm. To date, we have explored some of the challenges associated with this conflicting endeavor. The emphasis on short-term gains at the expense of long-term vitality is real. The President of the US stated that he wanted to open the country back up for business by Easter Sunday. What is more, Liberty University President just announed on 3/25/20 that he is opening the school back up to some 5,000 students. Your assignment is to evaluate our current economic model and capital market structure to determine if CEOs have the proper incentives to do the right thing for their shareholders. Are compensation models encouraging CEOs to take more risks than warranted?

Answer 1

Answer:

The President of the US stated that he wanted to open the country back up for business by Easter Sunday. Though there is major disease issue is seen in the nation and US is significantly suffering with the Covid-19 disease. Despite this US president stated that he is willing to open the country by Easter Sunday. This shows that US president is very desperate for the economy and he is willing to run the national economy during this severe covid-9 scenario as well. So with this, Liberty University President just announced on 3/25/20 that he is opening the school back up to some 5,000 students, thus like this things then starts.

Evaluating our current economic model and capital market structure, with determining if CEOs have the proper incentives to do the right thing for their shareholders. Yes the CEOs have the right to make right things for their stakeholders. They can plan the proper incentives so that they can plan for operations during this covid-19 scenario and plan right things for their stakeholders. But still managing the operations along with the covisd-19 scenario is not advisable and it is very risky for the CEO as well as for the stakeholders. Thus the CEO should not focus on their incentive and right for business, but CEOs should focus for the employee interest and people interest and should plan actions that will be helpful in managing the safety of the people from the covid-19 spread and prevention fo people such that they will be away from the impact of this chronic disease. Thus CEOs need to tale moral and ethical actions which will help the stakeholder, employee and community in the right sense. This is the right time for making the help to the community by implementing their corporate social responsibility projects. CEOs should not be worried of the economy and capital structure at this time and they should not focus on economy and capital impacts.

Yes, compensation models may be encouraging CEOs to take more risks than warranted but the CEOs should not be driven by the compensation models and they should focus on people safety and people protection rather than their own compensations. Compensations can be achieved when they will be alive, if they are not alive, then compensation will not be of any use. Thus focus should be given to the people safety and prevention from covisd-19 during this chronic virus spread in the world.