Question 1

RedCat LLC, a footwear manufacturing company, used to practice gainsharing. After organizational restructuring, the management decides to replace gainsharing with profit sharing. Which of the following is true of RedCat LLC?

Accepted Answer

Gainsharing is a system that rewards teams for performance improvements, while profit sharing distributes a portion of the company's profits to all employees, making it an organizational incentive.

Question 2

Special benefits-usually noncash items-for executives are termed _____.

Accepted Answer

Perquisites, also known as "perks," are noncash benefits given to executives, such as company cars, club memberships, and housing allowances. Executive salaries (A) and base salaries (B) generally refer to cash compensation. Golden parachutes (D) are typically large payments or benefits given to executives in the event of a merger or acquisition, as a form of financial protection.

Question 3

Executive compensation in public corporations is subject to shareholder approval via a "say-on-pay" provision in the _____.

Accepted Answer

The Dodd-Frank Act requires public corporations to hold a non-binding shareholder vote on executive compensation at least once every three years. This provision is known as "say-on-pay."

Question 4

Which of the following is a disadvantage of profit sharing plans?

Accepted Answer

The disadvantage of profit sharing plans is that employees must trust that management will accurately disclose financial and profit information. If employees do not trust their employers, they may be less motivated to work hard and contribute to the company's success. Additionally, if management does not provide accurate financial information, employees may not receive their fair share of profits.

Question 5

Under a straight piece-rate system, wages are determined by dividing the number of units produced by the piece rate for one unit.

Accepted Answer

Under a straight piece-rate system, wages are determined by multiplying the number of units produced by the piece rate for one unit, not dividing.

Question 6

Which of the following is a metric of sales programs in variable pay plans?

Accepted Answer

Increase in market share is a metric of sales programs in variable pay plans as it directly relates to the effectiveness of sales strategies and efforts.

Question 7

Variable pay plans attempt to provide tangible rewards, or incentives, to employees for performance beyond normal expectations.

Accepted Answer

Variable pay plans are designed to reward employees for extraordinary performance by providing incentives that are tangible.

Question 8

Stock option plans give employees the right to purchase a(n) _____.

Accepted Answer

Stock option plans typically grant employees the right to purchase a fixed number of shares of company stock at a specified exercise price, which is usually set at the stock's current market price at the time of the grant. This right is typically only exercisable for a limited period of time, typically a few years. Therefore, option plans do not usually offer employees an unlimited number of shares or an unlimited exercise period.

Question 9

The most prevalent forms of organization-wide incentives are piece-rate systems, sales commissions, and individual bonuses.

Accepted Answer

The most prevalent forms of organization-wide incentives are profit-sharing plans, gainsharing, and stock options, which are designed to reward all employees based on the overall performance of the organization, rather than individual performance metrics like piece-rate systems, sales commissions, and individual bonuses.

Question 10

Nonfinancial rewards cannot be used as incentives in pay-for-performance plans.

Accepted Answer

Nonfinancial rewards, such as recognition, flexible work arrangements, or opportunities for career advancement, can be used in pay-for-performance plans as complementary incentives to financial rewards.

Question 11

Which of the following statements is true of a discretionary system of determining bonuses?

Accepted Answer

A discretionary system of determining bonuses means that the decision-making authority rests with the CEO and the board of directors. They have the discretion to determine who receives a bonus and how much that bonus will be. The federal and state governments, shareholders, labor unions, and employees are not typically involved in this process.

Question 12

A provision that permits an organization to require an employee to return rewards obtained through unethical or negligent actions is known as a(n) _____.

Accepted Answer

A clawback provision allows an organization to recover rewards or bonuses given to an employee who obtains them through fraudulent or unethical means, such as manipulating financial statements. This provision helps to discourage such behavior and hold employees accountable for their actions. The other options do not relate to the recovery of rewards obtained through unethical or negligent actions.

Question 13

Cost reduction is classified as a work unit/team incentive.

Accepted Answer

Cost reduction can be a goal for a work unit or team to achieve, and achieving it can result in incentives or bonuses for the team members.

Question 14

In the context of incentives, an example of gainsharing is _____.

Accepted Answer

Gainsharing is a system where employees receive financial benefits from the improvements in productivity or performance they contribute to, typically measured against a baseline. Distributing surplus yields among employees when their performance improves above the baseline is a direct example of this incentive system.

Question 15

A percentage of the revenue generated by sales that is given to an agent or salesperson is called _____.

Accepted Answer

Commission is a percentage of the revenue generated by sales that is given to an agent or salesperson as compensation for their work. Severance pay is a one-time payment made to employees who are laid off or terminated, while a wage is a fixed amount paid to an employee per hour, day, or week. Basic salary is a fixed amount paid to an employee regardless of their sales performance.

Question 16

Which of the following statements is true of the salary-only approach?

Accepted Answer

The salary-only approach is suitable for organizations that prioritize serving and retaining existing accounts rather than generating new sales and accounts. This is because sales representatives who are compensated solely on salary have less motivation to engage in new business development activities. Additionally, the salary-only approach may not be appropriate for sales representatives who are new to the job or for organizations that need to incentivize their salesforce to achieve specific sales targets or objectives.

Question 17

Describe employee stock ownership plans.

Accepted Answer

The answer of Describe employee stock ownership plans....

Question 18

Which of the following is the most accurate metric of organizational performance in variable pay plans?

Accepted Answer

Revenue growth is the most accurate metric of organizational performance in variable pay plans as it directly reflects the success of the company and its ability to generate profits. Customer satisfaction and employee satisfaction can be influenced by factors outside the control of individual employees, and accident rates do not necessarily reflect overall organizational performance.

Question 19

The most common means of providing individual variable pay are profit sharing plans and employee stock plans.

Accepted Answer

Profit sharing plans and employee stock plans are common, but individual variable pay is more often provided through performance-based bonuses and commissions.

Question 20

The straight commission system is the most frequently used form of sales compensation.

Accepted Answer

The most frequently used form of sales compensation is actually a combination of salary plus commission, as it balances a guaranteed income with performance-based incentives, offering stability and motivation to sales employees.

Quiz 11: Total Rewards and Compensation