capital

问题如下：

A construction firm has the opportunity to invest in a high-risk, high-reward capital infrastructure project. Which of the following could be a reason why the company decides not to pursue the project?

选项：

A.

The compensation of managers is closely tied to the size of the company’s business.

B.

Management receives excessive all-cash compensation

C.

Management has recently received a generous options reward in the company’s shares.

解释：

B is correct. When compensation—particularly if it is excessive—is entirely in cash, the risk tolerance of managers may be too low, as they are inclined to protect their cash compensation. Additionally, there may be little upside for them if the project performs well.

A is incorrect, as it describes the “empire building” phenomenon that would likely result in the decision to grow the company at any cost in an attempt to secure higher compensation.

C is incorrect, as it would likely lead to an alignment of managers’ interests with those of shareholders.