definition of Moral Hazards. Why and to whom is this topic significant in terms of stock compensation for executives? Please note the topic should be relevant to the US stock market. Identify and...

Finance
Definition of Moral Hazards. Why and to whom is this topic significant in terms of stock compensation for executives? Please note the topic should be relevant to the US stock market.
Moral hazard is a type of risk where either one of the parties to a contract has not entered in an agreement in good faith. This may be in the form of providing misleading information about the assets, liabilities and the credit capacities. It also means that either one of the parties to the contract has taken an incentive with the intention of taking unusual risks in order to earn profits desperately prior to the settlement of the contract (Will Kenton, 2020).
Moral hazards have become a significant issue with respect to the executive pays. The executives may be rewarded for positive outcomes of good investments but are insulted for negative consequences with respect to investment which turns sour and can encourage excessive risks. Also,...