Properly designed management control systems have both fixed compensation and contingent compensation.

Question

Quizplus · Accepted Answer

This statement is true. Fixed compensation provides a base salary or wage, while contingent compensation (such as bonuses or stock options) provides additional rewards based on performance. If the contingent compensation is too low, employees may not feel incentivized to perform at their best, but if it is too high, they may take excessive risks to achieve the desired results. Therefore, a balance between fixed and contingent compensation is necessary for effective management control systems.

Properly Designed Management Control Systems Have Both Fixed Compensation and Contingent