Question 1

Human resource professionals have identified three types of goal-sharing plans. Which of the following is NOT one of those types?

Accepted Answer

Standard plus plans are not recognized as a type of goal-sharing plan among human resource professionals. The recognized types include single-goal plans, multi-goal plans, and financially funded plans.

Question 2

Which of the following statements regarding profit-sharing plans is NOT correct?

Accepted Answer

"Top-hat" plans are typically designed for a select group of management or highly compensated employees and are not widely available to all employees, making them ineligible for registration as a DPSP.

Question 3

What is the least common basis for allocating profit-sharing bonuses across employees in Canadian firms?

Accepted Answer

Allocating profit-sharing bonuses equally across all employees is the least common basis in Canadian firms. This is because it does not necessarily take into account individual performance or seniority, and may not be perceived as fair by all employees. Many firms choose to base bonuses on individual or team performance or a combination of performance and seniority.

Question 4

You are a minority shareholder in a private corporation, whereas your friend holds employee shares in a publicly traded corporation. Which of the following conditions will you NOT experience, in contrast to your friend?

Accepted Answer

The answer of You are a minority shareholder in a...

Question 5

Which of the following is NOT an example of a nonmonetary award?

Accepted Answer

The answer of Which of the following is NOT an...

Question 6

Which of the following is NOT a necessary component of goal-sharing plans?

Accepted Answer

The answer of Which of the following is NOT a...

Question 7

Which of the following statements is NOT true?

Accepted Answer

Stock bonus plans provide employees with shares of the company, not the right to purchase shares at a fixed price, which is a feature of stock options, not stock bonus plans.

Question 8

A group of farm workers normally pick 10,000 kilograms of cherries during a regular eight-hour shift. Joe, the operations manager, decides he will provide each picker in the group with a meaningful monetary reward if the farm workers are able to meet a new "stretch goal" of 12,500 kilograms per eight-hour shift? Which of the following terms best describes this new "stretch goal"?

Accepted Answer

The term "stretch goal" implies an increase in the original goal, hence the answer choice B, "goal plus," is the best description of this new target. Answer choice A, "standard plus," suggests an increase in the standard level of performance, which may not apply in this case. Answer choice C, "goal level," is not accurate as the new target is higher than the original goal. Answer choice D, "red circle plus," is not relevant to the context of the question.

Question 9

Your company has decided to distribute a goal-sharing bonus according to the salary levels of employees. Which of the following would be a natural outcome of this decision?

Accepted Answer

Distributing the goal-sharing bonus according to salary levels would maintain the same proportion of goal-sharing compensation in the compensation mix for all employees, regardless of their salary level. This would ensure fairness in the distribution of the bonus and prevent any perception of discrimination or favoritism. However, it may not discourage free-riding by some employees or adjust for actual time worked during the bonus period. It may also not be the most egalitarian distribution method as it would result in higher bonuses for employees with higher salaries.

Question 10

ABC Ltd. generated one million Canadian dollars in profits this year. ABC Ltd. decides to place 200,000 Canadian dollars (20 percent of pre-tax profits) in a bonus pool. In previous years, this figure has ranged from zero to 50 percent of pre-tax profits. What type of formula is ABC Ltd. using to determine contributions into the pool?

Accepted Answer

The company is using a discretionary formula because the bonus pool amount is not determined by a fixed percentage or threshold - it varies from year to year and is at the discretion of the company.

Question 11

According to the author, which of the following is the most important factor in the success of the goal-sharing plan?

Accepted Answer

The answer of According to the author, which of the...

Question 12

Which of the following is a major issue with employee stock plans?

Accepted Answer

Taxation is a major issue with employee stock plans. When employees exercise their options or sell their shares, they may be subject to income tax, capital gains tax, or both. The tax implications can be complex and can vary depending on the type of plan and the employee's individual circumstances.

Question 13

Which of the following statements regarding employee share purchase plans is NOT correct?

Accepted Answer

Employees typically purchase shares at a discounted price rather than receiving them at no cost.

Question 14

Which of the following best explains a phantom stock plan?

Accepted Answer

In a phantom stock plan, the employees receive a bonus or payout based on the performance of company stock, but they do not actually receive any stock. It is a form of incentive compensation that mimics actual stock ownership without the associated ownership rights.

Question 15

As a medium-sized company owner, you believe that it is morally just that employees receive a portion of the profits they help generate, and you want to provide them with some form of pension plan. Which of the following types of plans should you consider using?

Accepted Answer

Deferred profit sharing plans allow employees to receive a portion of the company's profits, aligning with the moral belief that employees should benefit from the profits they help generate.

Question 16

An employer issues Johnny 2,000 stock options in recognition of a very good year. These particular options vest after 24 months from the date of issuance with an exercise price of $21.00 per share. After 24 months, these shares trade in the open market at $25.00 per share, and Johnny decides to exercise his 2,000 options, generating a gain of $8,000 (minus transaction fees). Which of the following statements regarding Johnny's tax situation pursuant to these gains is true?

Accepted Answer

Johnny will have to pay taxes on the gain, but taxes will be paid at the capital gains rate. The gain from the exercise of the options is considered income, but the tax rate will be based on whether Johnny held the shares for more or less than a year. Since Johnny exercised the options and sold the shares after 24 months, the gain will be taxed at the long-term capital gains rate. This is typically a lower tax rate than the ordinary income tax rate.

Question 17

According to research on Canadian firms, in the majority of cases, which employees are included in the profit-sharing plan?

Accepted Answer

The answer of According to research on Canadian firms, in...

Question 18

Management decides to allocate 1,000 shares to a particular employee at a market value of $50.00 per share under a share appreciation rights plan. One year later, the value of these shares has increased to $65.00. How many shares would this employee actually receive as a bonus at the end of the year?

Accepted Answer

Under a share appreciation rights plan, the employee is entitled to the increase in the value of the shares, not the shares themselves. The increase in value is $15 per share ($65 - $50). For 1,000 shares, this totals $15,000. At the new value of $65 per share, this equates to $15,000 / $65 = 230.8 shares.

Question 19

You have been tasked with providing management with a list of factors distinguishing goal-sharing plans from gain-sharing plans. Which of the following should NOT be included in your list?

Accepted Answer

Goal-sharing plans do not typically focus on quantifying cost savings and sharing them using a fixed formula; this is more characteristic of gain-sharing plans.

Question 20

Which of the following would you consider NOT to be "best practice" when designing nonmonetary reward plans?

Accepted Answer

Rewarding only the top 10 percent of employees can create a competitive atmosphere and decrease overall morale. It is better to recognize and reward all deserving employees to promote a positive work environment and encourage everyone to strive for excellence.

Quiz 11: Designing Performance Pay Plans