Question 1

For a profit-sharing plan to be effective, which of the following possible actions must management be willing to take?
A)to stabilize profits so that the annual payoff is consistent
B)to increase innovative solutions to technical problems
C)to lower expectations of performance impact in the program's first year
D)to disclose financial and profit information to employees

Accepted Answer

In order for a profit-sharing plan to be effective, management must be willing to disclose financial and profit information to employees. This transparency allows employees to understand how the company is performing and how their contribution impacts the bottom line. Without this information, employees may not fully understand the purpose or value of the profit-sharing plan. Additionally, disclosure can help build trust and engagement among employees, which can lead to improved performance and longer-term retention.

Question 2

Which of the following terms is most associated with use of the company helicopter, country club memberships, first-class air travel, and a chauffeured limousine?
A)perquisites
B)golden handcuffs
C)motivators
D)executive mandates

Accepted Answer

Perquisites, or "perks," are benefits given to employees in addition to their regular salary and benefits. The items listed in the question are often considered perks or executive perks that are typically offered to top-level executives as part of their overall compensation package.

Question 3

Regarding benefits, which of the following statements describes the pattern that applies most to executives?
A)They often have health plans with no co-payments and no limitations on deductibles.
B)They typically have the same health benefits plans that other employees have.
C)They typically pay higher deductibles on their health-care plans than do other employees.
D)They usually "self-insure" for their health care.

Accepted Answer

Executives often receive more generous benefits packages than other employees, including health plans with no co-payments and no limitations on deductibles.

Question 4

Which of the following is the main reason executives value perks?
A)visible symbols of status
B)linked to corporate performance
C)deferrable until retirement
D)low cost to the company

Accepted Answer

Perks are often seen as symbols of status and power, which can be important for executives who value their reputation and image. Other factors such as performance or deferment until retirement may also be considerations, but the primary reason for valuing perks is their perceived ability to confer status and prestige.

Question 5

Andrew is excited about the new program at work. He will be allowed to purchase 20 shares of stock at $45 per share for a limited period. Andrew has chosen to take advantage of this plan because he expects that the market price of the stock will exceed $45. Which kind of plan is it?
A)stock option
B)gainsharing
C)employee stock ownership (ESOP)
D)windfall incentive

Accepted Answer

A stock option plan allows employees to purchase stocks at a discounted price for a limited period with the expectation that the market price will rise, which will allow employees to sell the shares at a profit. This is exactly what Andrew is doing, making A the correct answer. Gainsharing involves sharing the company's profits with employees, ESOP involves employees owning stock in the company they work for, and a windfall incentive is a bonus given to employees based on unexpected company performance.

Question 6

Why do organizations offer deferred compensation to executives?
A)to emphasize long-term performance of the organization
B)to hide excessive one-time bonuses earned by executives.
C)to help executives with tax liabilities caused by incentive plans
D)to place "golden handcuffs" on key executives so they won't leave prematurely

Accepted Answer

The answer of Why do organizations offer deferred compensation to...

Question 7

From an employer's perspective, which of the following is the main advantage in setting up an employee stock ownership plan?
A)favourable tax treatment on earnings earmarked for use in the ESOP
B)reduction of financial risk for employees and consequent reduction in employee turnover rate
C)increased protection against union-organizing attempts
D)increased employee productivity

Accepted Answer

From an employer's perspective, the main advantage of setting up an employee stock ownership plan is the favourable tax treatment on earnings earmarked for use in the ESOP. This can provide significant tax benefits for the company and can also be a way to encourage employees to invest in the company's success. The other options listed may also be potential benefits of an ESOP, but they are not the main advantage from the employer's perspective.

Question 8

Which of the following criteria does NOT provide a reliable base for allocating profits among employees?
A)each employee's earnings
B)the union status of each employee
C)the performance level of each employee
D)each employee's years of service with the company

Accepted Answer

Union status is not a reliable criterion for allocating profits among employees because it is based on a factor external to the individual's performance or contribution to the company's success. Factors such as earnings, performance level, and years of service are more directly related to an employee's value to the company and can provide a more equitable basis for allocating profits.

Question 9

Which of the following statements does NOT accurately characterize the Scanlon plan?
A)Employees share in pre-established cost savings based on employee effort.
B)Research results indicate that productivity and quality are increased and costs are reduced.
C)Formal employee participation is necessary.
D)The norm is that worker bonuses are all paid out each time.

Accepted Answer

The statement that worker bonuses are all paid out each time is incorrect. In the Scanlon plan, bonuses are based on the pre-established cost savings and may not necessarily be paid out in full every time.

Question 10

Which of the following statements best puts into perspective the base salary of the CEO of a large for-profit organization?
A)It is typically20 times larger than the salary of the average worker in the organization.
B)It is typically the largest part of the CEO's total compensation.
C)It is likely less than half of the CEO's total compensation.
D)It is often deferred until after the CEO retires.

Accepted Answer

Although the base salary of a CEO of a large for-profit organization may seem extremely high, it is often a relatively small portion of their total compensation package, which includes bonuses, stock options, and other benefits. Therefore, it is likely that the CEO's base salary is less than half of their total compensation.

Question 11

Organizational incentive systems have several objectives. Which option does NOT represent a primary objective?
A)increasing productivity
B)enhancing employee morale
C)attracting and retaining employees
D)promoting employee innovation

Accepted Answer

Promoting employee innovation, while beneficial, is not typically considered a primary objective of organizational incentive systems. The main objectives are usually focused on increasing productivity, enhancing morale, and attracting and retaining employees. Innovation can be a result of these objectives but is not the primary goal.

Question 12

In one kind of gainsharing program, the employees receive a bonus if the ratio of labour costs to the sales value of production is below a set standard. Which of the following is the name of the program?
A)Scanlon plan
B)Improshare
C)earnings-at-risk
D)Rucker plan

Accepted Answer

The Scanlon plan is a type of gainsharing program where employees receive bonuses based on the ratio of labor costs to the sales value of production being below a predetermined standard.

Question 13

In order to motivate top corporate executives to focus on long-term organizational performance, which kinds of financial targets should incentives be based on?
A)monthly
B)annual
C)multiple year
D)quarterly

Accepted Answer

In order to motivate top corporate executives to focus on long-term organizational performance, incentives should be based on multiple-year financial targets. Monthly and quarterly targets encourage short-term thinking and may lead to unethical behavior to meet those targets. Annual targets are slightly better than quarterly targets, but may still encourage short-term thinking. Multiple-year targets encourage executives to take a wider perspective and make decisions that benefit the organization in the long run.

Question 14

Which of the following statements best describes the Rucker plan's approach to gainsharing?
A)The ratio measuring the gain compares labour costs to the value added in production.
B)The gain is the decrease in labour hours needed to produce a unit of product.
C)Employees receive a bonus if the ratio of labour costs to the sales value of production is below a set standard.
D)Base wage dissatisfaction is created that, in turn, triggers greater effort directed toward performance.

Accepted Answer

The Rucker plan's approach to gainsharing involves comparing labor costs to the value added in production to determine the gain, which is then shared with employees. This method focuses on improving productivity and efficiency by encouraging employees to work smarter, not harder, by directly linking their efforts to their rewards.

Question 15

Which of the following ideas is at the heart of most executive compensation plans?
A)Executives are more focused on their base compensation than they are on the variable pay.
B)Executive compensation should be focused on the organization's current performance in the stock market.
C)Executives should be rewarded if the organization grows in profitability and value over a period of years.
D)Executives view status and image as important as compensation.

Accepted Answer

The idea that executives should be rewarded if the organization grows in profitability and value over a period of years is at the heart of most executive compensation plans, as it aligns the interests of executives with the long-term success of the company. Base compensation is only one part of the overall compensation package, and variable pay (such as bonuses and stock options) is often used to incentivize performance. While stock market performance may be a consideration, it is not the only factor, as companies may prioritize other goals such as innovation or sustainability. Status and image may be important to some executives, but they are not typically the primary focus of compensation plans.

Question 16

A medium-sized law firm every year distributes a bonus to its employees based on the size of the cases it has won. Even though not every employee has worked on every case, the senior partners of the law firm feel that such a bonus motivates employees to cooperate with and assist one another in times of high workloads. Which type of incentive are they using?
A)team
B)organizational
C)individual
D)group

Accepted Answer

The answer of A medium-sized law firm every year distributes...

Question 17

Jessica is an employee for one of the largest corporations in Canada. She makes the average pay of workers in this organization. The CEO of Jessica's company earns many times more than what she earns. Which of the following numbers is the closest multiplier?
A)200
B)10
C)50
D)100

Accepted Answer

In large corporations, CEOs often earn significantly more than the average employee. In many cases, this can be around 200 times the average worker's salary, especially in large corporations in North America.

Question 18

Enron, WorldCom, Tyco, and other companies underwent executive compensation scandals. Which of the following were mainly subject to abuse?
A)stock options
B)executive perks
C)deferred compensation
D)ESOPs

Accepted Answer

Stock options were mainly subject to abuse in executive compensation scandals. These scandals involved granting executives in-the-money stock options, backdating them, or manipulating the timing of option grants to increase their potential value. These actions inflated executive compensation and misled investors by misrepresenting the true cost of compensation. Executive perks, deferred compensation, and ESOPs were not as commonly abused in these scandals.

Question 19

According to research, which of the following do managers who adopt an earnings-at-risk incentive plan NOT need to be aware of?
A)the importance of employee participation in developing the plan
B)the need for an environment that does not put newer employees at a disadvantage
C)the level of personal control employees have over targeted performance behaviours
D)the negative reactions employees may have

Accepted Answer

The answer of According to research, which of the following...

Question 20

What must an organizational incentive program do in order to be effective?
A)include everyone from non-exempt employees to managers and executives
B)reward the shareholders for investing in the business
C)pay out every year regardless of whether the organization is profitable
D)give higher rewards to employees whose individual efforts are outstanding

Accepted Answer

An effective organizational incentive program should be inclusive of all employees, from non-exempt personnel to managers and executives, because everyone's contributions to the organization are vital. When an incentive program rewards only certain categories of employees or individuals, it may create disengagement among those who feel left out or undervalued. By contrast, an inclusive program can foster a culture of teamwork and encourage everyone to work together towards common goals.

Quiz 11: Variable Pay and Executive Compensation

For a profit-sharing plan to be effective, which of the following possible actions must management be willing to take?

Which of the following terms is most associated with use of the company helicopter, country club memberships, first-class air travel, and a chauffeured limousine?

Regarding benefits, which of the following statements describes the pattern that applies most to executives?

Which of the following is the main reason executives value perks?

Andrew is excited about the new program at work. He will be allowed to purchase 20 shares of stock at $45 per share for a limited period. Andrew has chosen to take advantage of this plan because he expects that the market price of the stock will exceed $45. Which kind of plan is it?

Why do organizations offer deferred compensation to executives?

From an employer's perspective, which of the following is the main advantage in setting up an employee stock ownership plan?

Which of the following criteria does NOT provide a reliable base for allocating profits among employees?

Which of the following statements does NOT accurately characterize the Scanlon plan?

Which of the following statements best puts into perspective the base salary of the CEO of a large for-profit organization?

Organizational incentive systems have several objectives. Which option does NOT represent a primary objective?

In one kind of gainsharing program, the employees receive a bonus if the ratio of labour costs to the sales value of production is below a set standard. Which of the following is the name of the program?

In order to motivate top corporate executives to focus on long-term organizational performance, which kinds of financial targets should incentives be based on?

Which of the following statements best describes the Rucker plan's approach to gainsharing?

Which of the following ideas is at the heart of most executive compensation plans?

Jessica is an employee for one of the largest corporations in Canada. She makes the average pay of workers in this organization. The CEO of Jessica's company earns many times more than what she earns. Which of the following numbers is the closest multiplier?

Enron, WorldCom, Tyco, and other companies underwent executive compensation scandals. Which of the following were mainly subject to abuse?

According to research, which of the following do managers who adopt an earnings-at-risk incentive plan NOT need to be aware of?

What must an organizational incentive program do in order to be effective?