Which of the following compensation systems would not be classified as an outcome-oriented contracting scheme (using agency theory terminology)?
A)Stock options
B)Profit sharing
C)Commissions
D)Merit pay

Question

Quizplus · Accepted Answer

Merit pay is not an outcome-oriented contracting scheme as it is based on an employee's individual performance rather than the overall performance of the organization. Outcome-oriented contracting schemes, such as stock options, profit sharing, and commissions, are designed to align employee incentives with the success of the company.

Which of the Following Compensation Systems Would Not Be Classified