Because effective incentive compensation plans must induce individual behavior compatible with increasing the firm's wealth,for long-term incentives firms give

Question

Quizplus · Accepted Answer

Deferred compensation is the best choice for long-term incentives as it aligns the interests of employees with the long-term success of the firm. By deferring part of an employee's compensation, they are motivated to stay with the company and work towards long-term goals rather than short-term gains. Cash bonuses and profit sharing provide immediate incentive, but may not encourage long-term thinking. Special awards may be a form of recognition, but do not provide a direct financial incentive for performance. Reorganizations are not a form of incentive compensation.

Because Effective Incentive Compensation Plans Must Induce Individual Behavior Compatible