The parent company would want to reward managers based on division revenues because
A)The managers usually have the least information about their divisions
B)It would incentivize the otherwise clueless managers about the daily activities of their divisions
C)The managers usually have the best information about how to run their divisions
D)None of the above

Question

​The parent company would want to reward managers based on division revenues because
A)​The managers usually have the least information about their divisions
B)It would incentivize the otherwise clueless managers about the daily activities of their divisions
C)The managers usually have the best information about how to run their divisions
D)​None of the above

Quizplus · Accepted Answer

Managers of a division usually have the best information about how to run their divisions as they are responsible for the day-to-day operations and have a better understanding of the market and customers. By rewarding them based on their division's revenues, they are incentivized to make decisions that will increase their division's revenue and ultimately benefit the parent company. Option A and B are incorrect as they imply that the managers have limited knowledge and understanding of their divisions, which is not necessarily true.

​The Parent Company Would Want to Reward Managers Based on Division

The Parent Company Would Want to Reward Managers Based on Division