At Maremount Corp., ten percent of each salesperson's yearly bonus is based on whether the company as a whole reaches its yearly financial goals. The company's compensation structure is based on which fundamental principle?
A) People will work to accomplish a goal if they have a real stake in reaching the goal.
B) Incentive structures should be as simple as possible.
C) An incentive scheme will be more effective if it encourages individuals to act in ways that benefit both society and the individual.
D) Compensation policies must be legal.
E) People are more likely to adhere to a policy if they have had some input into the development of the policy.

Question

Quizplus · Accepted Answer

Maremount Corp.'s compensation structure is based on the fundamental principle that people will work to accomplish a goal if they have a real stake in reaching the goal. By tying a portion of each salesperson's bonus to the company's overall financial performance, Maremount Corp. is giving salespeople a real stake in the company's success, which should motivate them to work harder to help the company achieve its financial goals.