Management incentive compensation program

The board of directors of Crossedcurrents, Inc. will hold its quarterly meeting next week. One of the items on the agenda is a revision to the management incentive compensation program (ICP). Currently, the ICP provides that incentive bonuses will be based on the year-to-year change in quarterly net profits shown in the company’s Forms 10-Q and, for the fourth quarter, Form 10-K filed with the SEC. If profits go down, there will be no bonuses. Bonuses can be paid four times a year. The proposal is to change the metric from annual changes in the Forms 10-Q to an annual target set at the beginning of the year and measured using a non-GAAP calculation of “business profits.” Crossedcurrents, Inc. is a U.S. company with no international operations. It is publicly traded. Required: Using the decision-making model and Kant’s version of deontology, evaluate the decision the board of directors must make regarding the proposed change to the ICP.

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