Compensation Aligned with Cost of Capital

Compensation for executives should be tied to the cost of capital to align their interests with the company's performance. The current practice of offering fixed price options for 10 years without considering the cost of capital is criticized. Executives should not be rewarded with interest-free loans for an extended period. Instead, a compensation arrangement should reflect the overall performance of the entire enterprise, rather than specific units. This approach ensures that executives are more invested in the company's success and that their compensation is fair and aligned with the business's intrinsic value.