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A company has a policy making the compensation of its CEO proportional to the dividends that are paid to shareholders. If the dividends increase from $72 to $80 and the CEO’s compensation is increased from $360,000 to $420,000, was the company’s policy followed? yes or no

Verified Answer :

DeannaJ

Percentage increase of dividends:
[(80-72)/72] x 100 = 11.1% increase

Percentage increase of CEO compensation:
[(420000-3600000/3600000] x 100 = 16.67% increase

Therefore the company policy was not followed as the CEO's compensation had a greater percentage increase than the dividends to the shareholders

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