Which of the following best defines "reasonableness" in executive compensation?

The concept of "reasonableness" in executive compensation typically refers to an amount that is considered appropriate given the responsibilities and services performed by the executive, as well as how it aligns with what is commonly practiced within the industry. Option C highlights this notion by emphasizing that executive pay should be consistent with industry standards and appropriate for the services rendered.

This means that compensation should reflect the value the executive brings to the company, taking into account the scope of their responsibilities, their expertise, and the prevailing compensation practices within the relevant industry. This standard is often utilized by regulatory agencies, such as the IRS, to ensure that companies do not pay excessively high compensation that could raise concerns about fairness or tax deductibility.

In contrast, the other options do not encapsulate the suitable criteria for assessing executive compensation. The notion that reasonableness is purely subjective (the first option) does not adequately capture the objective measurement involved with industry comparables. The second option suggests that any compensation above industry standards is reasonable, which is misleading as it overlooks considerations of the specific services provided. Lastly, the fourth option incorrectly reduces compensation discussions to basic minimum wage, ignoring the complexity and responsibilities associated with executive roles.