You are CEO of a public traded Fortune 500 company. 80% of your pay is stock (meaning you get paid more if the company stock price goes up), and 20% of your pay is a fixed amount of base salary, paid in cash. The company had a fantastic year. Sales have doubled and earnings (net income) reach over $100 million for the first time. The company likely has a double digit growth in years to come.

Answer the three questions:

(1) What is the term (2 words) describing the stock based payment that shareholders (i.e., the principle) use to align CEO's (the agent) incentives with theirs? (1 point)

(2) The shareholders stipulate a lock-in period that CEO cannot sell his share for 10 years. As a CEO, what is the best use of this earning of $100 million? (1.5 point)

(3) The company removes the restriction. You, as CEO, can sell shares any time now. What is your plan to use the $100 million? (1.5 point)