Suppose you decide to elicit high CEO effort when and if good luck occurs by paying the bonus for $1 billion outcomes only. What criticism can you see with this incentive contract plan?

Answer 1

Suppose you decide to elicit high CEO effort when and if bad luck occurs by paying the bonus for $500 million outcomes. What criticism can you see with this incentive contract plan?

Answer 2

What is the maximum amount it would be worth to shareholders to elicit high CEO effort all the time rather low CEO effort all the time?