Assume that you have been asked by the board of directors of Azrieli to give your opinion on the CEO's bonus formula and to assist the board in calculating for the period of the first quarter of 2020:

Assume that the bonus formula is (the formula below is for the purpose of the question only and is not related to reality):

CEO Bonus = 1% * ("Net Profit for the Period" - Financing Income + Financing Expenses + Dividend Declared)

The aforesaid data, on the basis of Azrieli's consolidated reports.

1. Based on the characteristics of the Azrieli Group's activity, does this formula make sense? For what actions and behaviors may this formula incentivize the CEO? Does this formula measure the activities relevant to the CEO?

2. What reward formula would you offer to the CEO of the Azrieli Group? What is its purpose?