Question 1.) Most stocks and options awarded or charged to CEOs are not indexed to either industry average or to marketwide averages (e.g., the S&P 500). If the goal is to create incentives for CEOs to increase their companies' value, but also protect them from added risk from stock market fluctuations, does it make sense to index options or not? Explain briefly.
Question 2.) Do you think CEOs are too highly paid (relative to their economic value) or not?
If your answer is Yes, offer an alternative method or formula for how to pay CEOs and briefly explain why a board should use it.
If your answer is No, explain what you would predict would happen if pay was cut (e.g. pay caps were regulated by the Federal government).