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Exam 12: Incentive Plans and Executive Compensation

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Question 41

Multiple Choice

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The most frequently used form of sales compensation is the

A) salary only.
B) straight commission.
C) salary plus commission.
D) differential commission.

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Question 42

Multiple Choice

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At the heart of most executive performance-based incentive plans is the idea that

A) at the executive level, status and image are as important as actual compensation.
B) executives should be rewarded if the organization grows in profitability and value over a period of years.
C) executive compensation should be based on the organization's current performance in the stock market.
D) executives are more focused on their base compensation than they are on the variable pay.

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Question 43

True/False

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Because of the difficulties of designing a truly functional incentive system,fewer than half of all organizations use variable pay.

Organizations offer deferred compensation to executives in order to

____ is an example of an organizational-level variable pay system.

Potential useful metrics for analyzing variable pay plans include all of the following EXCEPT

Jessica works for one of the largest corporations in the U.S..She makes the average pay of workers in this organization,$30,000.It would be a good guess that the CEO of Jessica's company makes

The CEO of a major corporation is being interviewed by a reporter from a TV news show.The CEO makes over $150 million a year.The reporter asks,"Are you really worth $150 million a year to your company,especially when your company has lost money the last three years? In fact,most of your employees make minimum wage which is not enough to support a family." All of the following are plausible responses by the executive to the reporter's question EXCEPT

What is the role of a compensation committee of the Board of Directors?

Traditional compensation systems pay employees differently based on their job responsibilities and base employee increases mainly on

The most widely used long-term performance incentives for executives is/are

When Paula visited a financial advisor,he warned her that her retirement plans were risky because both her ESOP as well as her salary and benefits depend on her employer's continued survival and profitability.The financial advisor is correct in telling Paula she should diversify her retirement investments.

Stock option plans are restricted to employees who are managers or executives.

In designing the company's new team incentive plan,the vice president of HR wishes to strongly link the team's efforts with its effective performance.The timing of incentive payouts should be

As director of compensation for BlueBottle Enterprises,you have implemented a highly successful pay-for-performance system.This system has worked successfully for three years as measured by a number of financial and non-financial measures.Because of this success you are considering quitting BlueBottle and setting up your own consulting firm to promote this system.Which of the following statements is TRUE?

Beverly is a member of a five-person work team.Beverly is conscientious and reliable,but she works the most slowly of the team members.The team is paid a monthly bonus based on its production numbers.If all team members are paid the same size bonus,Beverly will be subject to social pressure to work faster.

The U.S.is relatively unusual in tying significant proportions of executive pay to organizational profitability and value.

Archie is a security guard.He must monitor displays from multiple security cameras for suspicious behavior by individuals or groups.As long as he is alert and awake,Archie's performance will be adequate.Archie's job is well-suited for an individual incentive.

Team harmony is enhanced when team members decide as a group how to distribute performance bonuses to each team member because each member understands what he/she has contributed to the group's performance.

If managers wish to motivate individual contributions to team performance,an equitable distribution of team incentives would mean that