Question 1

According to research,most firms use ________ to motivate the short-term performance of managers.

Accepted Answer

B)Annual bonuses are being used by more firms to motivate the short-term performance of managers.Annual bonuses are tied to company profitability.

Question 2

Which term refers to payments a firm makes related to changes in company ownership?

Accepted Answer

C)Golden parachutes are extraordinary payments companies make to executives in connection with a change in ownership or control of a company.For example,a company's golden parachute clause might state that,with a change in ownership of the firm,the executive would receive a one-time payment of $2 million.

Question 3

What should be the central focus of a firm's executive reward packages?

Accepted Answer

B)The executives' reward packages must align with the goal of achieving the company's strategic aims.Each pay component should help focus the manager's attention on the behaviors required to achieve the company's strategic goals.

Question 4

The Sarbanes-Oxley Act was most likely enacted to ________.

Accepted Answer

D)Congress passed the Sarbanes-Oxley Act of 2002 to inject more responsibility into executives' and board members' decisions.It makes them personally liable for violating their fiduciary responsibilities to their shareholders.

Question 5

A(n)________ plan is an incentive plan that engages many or all employees in a common effort to achieve a company's productivity objectives with any resulting cost-savings shared among employees and the company.

Accepted Answer

C)Gainsharing is an incentive plan that engages many or all employees in a common effort to achieve a company's productivity objectives,with any resulting cost-savings gains shared among employees and the company.

Question 6

What is a disadvantage of straight commission plans?

Accepted Answer

C)With straight commission plans,some salespeople neglect selling hard-to-sell items.However,sales costs are proportionate to sales rather than fixed,so the company's fixed sales costs are thus lower.It's a plan that's easy to understand and compute.

Question 7

Marie,a top manager at Levon Marketing,will receive 500 shares of the firm's stock if the firm's sales increase by 5% in the next quarter.Which of the following was Marie most likely given?

Accepted Answer

D)With performance-contingent restricted stock,the executive receives his or her shares only if he or she meets the preset performance targets.With restricted stock plans,the firm usually awards rights to the shares without cost to the executive,but the employee is restricted from acquiring (and selling)the shares for,say,5 years.

Question 8

What is the main benefit of paying salespeople a combination of salary and commission?

Accepted Answer

A)Most companies pay salespeople a combination of salary and commissions.Such plans cushion the salesperson's downside risk (of earning nothing),while limiting the risk that the commissions could get out of hand from the firm's point of view.However,the plans are more complex to administer than straight commission.

Question 9

Which term refers to the right to purchase a stated number of shares of a company stock at today's price at some time in the future?

Accepted Answer

A)A stock option is the right to purchase a specific number of shares of company stock at a specific price during a specific period.The executive thus hopes to profit by exercising his or her option in the future but at today's price.This assumes the stock will go up.

Question 10

What is the primary disadvantage of using the straight salary approach to pay salespeople?

Accepted Answer

D)The main disadvantage of straight salary for salespeople is that it may not motivate high performers who thrive on a link between performance and pay.However,the approach makes it easier to switch territories or to reassign salespeople,and it can foster sales staff loyalty.

Question 11

Which incentive plan is based on a philosophy that managers and employees must cooperate together?

Accepted Answer

B)Gainsharing plans are characterized by a philosophy assumes that managers and workers must rid themselves of the "us"and "them"attitudes that normally inhibit employees from developing a sense of ownership in the company.

Question 12

What is the most likely reason that firms are implementing group incentive plans?

Accepted Answer

B)Firms increasingly rely on teams to manage their work.They therefore need incentive plans that encourage teamwork and focus team members' attention on performance.

Question 13

Most gainsharing plans include all of the following features EXCEPT ________.

Accepted Answer

B)The features of most gainsharing plans include a philosophy of cooperation,identity,competence,an involvement system,and a sharing of benefits formula.The plan does not call for focusing on individual achievement.

Question 14

All of the following are factors that influence an annual bonus EXCEPT ________.

Accepted Answer

B)Annual bonus plans are used to motivate managers' short-term performance.Four factors influence one's bonus: eligibility,fund size,individual performance,and formula.

Question 15

An executive who receives a ________ stock receives units instead of shares of company stock.The units will be equated to cash in the future if appreciation occurs.

Accepted Answer

A)Under phantom stock plans,executives receive not shares but "units"that are similar to shares of company stock.Then at some future time,they receive value (usually in cash)equal to the appreciation of the "phantom"stock they own.

Question 16

Which of the following involves setting a production standard for a specific work group and then paying incentives to the group members if they exceed the standard?

Accepted Answer

A)A team (or group)incentive plan is used by firms that rely on teams to manage work.This type of plan involves setting a production standard for a specific work group.Group members are paid incentives if the group exceeds the production standard.

Question 17

A straight salary for salespeople is most appropriate when the main tasks involve ________.

Accepted Answer

C)Straight salaries make sense when the main task involves prospecting (finding new clients)or account servicing (such as participating in trade shows).Commissions are more likely to motivate going beyond sales quotas.

Question 18

All of the following are examples of organization-wide incentive plans EXCEPT ________.

Accepted Answer

C)Organization-wide incentive plans are plans in which all or most employees can participate,and which generally tie the reward to some measure of company-wide performance.Plans include profit sharing,Scanlon/gainsharing plans,and employee stock ownership (ESOP)plans.Golden parachutes are given to individual employees.

Question 19

Which of the following is the primary benefit of employee stock ownership plans?

Accepted Answer

C)The main reason that ESOPs are popular is that a firm gets a tax deduction equal to the fair market value of the shares it transfers to the trustee and can claim an income tax deduction for dividends paid on ESOP-owned stock.Employees are taxed when they receive a distribution from the trust,usually at retirement.

Question 20

Which of the following would most likely be used by a firm that wants to retain the services of a top manager for a specified period of time?

Accepted Answer

A)With restricted stock plans,the firm usually awards rights to the shares without cost to the executive,but the employee is restricted from acquiring (and selling)the shares for,say,5 years.The employer's aim is to retain the employee's services during that time.Stock appreciation rights (SARs)permit the recipient to exercise the stock option (by buying the stock)or to take any appreciation in the stock price in cash,stock,or some combination of these.

Quiz 11: Pay for Performance and Employee Benefits