461 Chapter 13

Steve has a small company with 12 employees. One of his employees, Larry, has been laid off because his work has been outsourced. Larry had health coverage through Steve's company and wants to continue that coverage. According to COBRA, how long can Larry continue his coverage through Steve's company after being laid off? 36 months 24 months 18 months 0 months

0 Months

Which of the following involves periodic adjustments based typically on changes in the consumer price index? A COLA clause A deferred wage increase A reopener clause An annual improvement adjustment

A COLA clause

_____ curve expresses the relationship between years since last degree, performance, and salary. The Phillips The marginal productivity A tenure A maturity

A maturity

Which of the following is a hybrid of defined benefit and defined contribution plans? 401(k) plan Employee stock ownership plan Cash balance plan Profit-sharing plan

Cash balance plan

Which of the following is the most popular executive perk offered by most companies? Executive physicals Payment of club dues Family spousal travel Corporate housing

Executive physicals

Which of the following is NOT a reason for the recent decline in the use of stock options in executive pay? There has been a growing pressure to expense stock options in annual reports. In a falling market, stock options are underwater—the market price is below the exercise price. Financial Accounting Standard Number 313 raises the cost of using stock options. Stock options do not pay for executive performance.

Financial Accounting Standard Number 313 raises the cost of using stock options

Maxford Corp. offers full vesting after two years. However, it does not offer portability of pension to its employees. Which of the following statements is true in this scenario? Employees of Maxford will receive 20 percent of their pension if they quit after one year. Maxford does not have to provide vested benefits to employees who quit before six months. Employees of Maxford who quit can have their pension benefits transferred to the new employer. Maxford does not have to provide vested benefits if employees quit of their own volition after two years.

Maxford does not have to provide vested benefits to employees who quit before six months

_____ relieve an employer's liability when a pre-employment injury combines with a work-related injury to produce a disability greater than that caused by the latter alone. Collateral funds Second-injury funds Insolvency funds Pre-employment funds

Second-injury funds

What is the first question that should be asked when determining the amount of retirement income an employer should provide? Should Social Security payments be factored in when considering the level of income an employee should have during retirement? How should seniority be factored into the payout formula? What level of retirement compensation would the employer like to set as a target, expressed in relation to pre-retirement earnings? Should other postretirement income sources be integrated with the pension payment?

What level of retirement compensation would the employer like to set as a target, expressed in relation to pre-retirement earnings

The most common approach to motivating executives to make decisions that are in the best interests of stockholders is _____. high base salaries with few bonuses average base salaries with significant firm performance bonuses a long-term incentive plan using stock options average base salary with performance-based perks

a long-term incentive plan using stock options

Leah, the CEO of SteadyResults Corp., feels that she is underpaid, so she hires a compensation consultant to survey actual competitors of the company. According to agency theory, if SteadyResults performs poorly, her salary will most likely: remain the same as CEO salary is based only on performance. be withheld and paid at a later date as the company is doing poorly. be increased in order to retain her. remain the same as the company is doing poorly.

be increased in order to retain her

In a _____ plan, an employer agrees to provide a specific level of retirement pension, which is expressed as either a fixed dollar or a percentage-of-earnings amount that may vary (increase) with years of seniority in the company. defined benefit noncontributory benefit 401(k) shared benefit

defined benefit

With gain-sharing plans, the most common union strategy is to _____. delay taking a stand until real benefits are more apparent be very enthusiastic have direct opposition to the plans as soon as they are suggested by the management have no concern for the plans

delay taking a stand until real benefits are more apparent

Experts attribute the decline in dollar cost of workers' compensation after 2005 relates to: increased variable component of base wage. devaluation of the dollar. employer safety programs. relaxed federal regulations.

employer safety programs

Which of the following types of workers are generally NOT covered by workers' compensation? State government employees Private sector employees Railroad workers Farm workers

farm workers

A recent article analyzing the results from over 100 executive pay studies shows that the best predictor of executive pay, by far, is _____. firm size the number of insiders on the board of directors the industry in which the firm operates firm performance

firm size

An employee who changes jobs four or more times during his or her career will likely receive a pension approximately _____ as that of an employee whose working career is spent with one employer, assuming that both employees have the same starting salary and receive annual increases equal to inflation rate. twice as large the same size one-fourth the size half the size

half the size

Which of the following is a benefit under Social Security? Lump-sum death payments Job security Work/life balance Overtime pay

lump-sum death payments

Annual bonuses often play a major role in executive compensation and are primarily designed to _____. motivate better short-term performance reduce overtime pay decrease pay differentials between supervisors and subordinates increase employee turnover

motivate better short-term performance

If improved account retention became a major focus of attention, the performance measure stressed would be _____. gross margin on sales or price per unit percentage account erosion a volume measure a customer satisfaction index

percentage account erosion

A(n) _____ awards cash or stock if specific goals are achieved. nonqualified stock option incentive stock option restricted stock plan performance share plan

performance share plan

A _____ plan is a hybrid health plan combining the benefits of HMO and _____. point-of-service; preferred provider organization POS; Blue Cross managed care; POS consolidated health; PPO

point-of-service; preferred provider organization

All of the following EXCEPT _____ would be considered a special compensation group. sales staff contingent workers unpaid interns professional employees

unpaid interns

The majority of defined benefit plans calculate average earnings over the last _____ years of service for a prospective retiree. 2 to 4 3 to 5 6 to 8 7 to 9

3-5

For an employee to gain lifetime coverage under Social Security, they must have worked for _____ quarters during which they were covered by the Act. 20 30 40 10

40

The differential between supervisors' base pay and their highest paid subordinate is typically _____ percent. 0 to 5 5 to 30 30 to 50 50 to 90

5 to 30

At the time it is granted, which of the following has no tax implications for an executive? Phantom stock plans Incentive stock options Stock appreciation rights Performance share/unit plans

Incentive stock options

Michael was laid off by his company owing to budget cuts. Before being laid off, he earned $1,000 per week. If he has been receiving unemployment insurance benefits for 26 weeks, which of the following statements is true in this scenario? Michael can continue to avail unemployment benefits for another 26 weeks. Michael is eligible for $1,000 per week if he can show that he has been earnestly searching for jobs. Michael is no longer eligible for unemployment benefits. Michael will now only be eligible for 20 percent of his previous income as unemployment benefits.

Michael is no longer eligible for unemployment benefits

NaxWell Corp. sells a smart wristband that, apart from monitoring heart rate and blood pressure, also reminds users to stand and walk every half hour. As part of its promotional efforts, a celebrity starts wearing the wristband, thereby increasing its popularity and ease of sale. Which of the following is most likely to happen? NaxWell will set lower sales targets for its employees. NaxWell is likely to increase base salaries and decrease incentives. NaxWell is likely to lower its executive compensation in order to increase stock price. NaxWell will hire only contingent workers.

NaxWell is likely to increase base salaries and decrease incentives

In the majority of the states, unemployment insurance is financed exclusively by: joint contributions by employee unions. the philanthropy of co-workers. federal, state, and employee contributions. employers that pay federal and state unemployment insurance.

employers that pay federal and state unemployment insurance

Contingent workers receive _____ benefits than regular workers; contingent workers' benefits cost _____ for employers than it does for regular workers. more; less fewer; more more; more fewer; less

fewer; less

Popular stereotypes of salespeople characterize them as being heavily motivated by _____. financial compensation personal growth and job security recognition and appreciation promotional opportunities

financial compensation

Basically a phenomenon of the union sector, two-tier wage structures differentiate pay based upon the _____. type of work hiring date place of work length of contract, if applicable

hiring date

Hannah is the CEO of JF Corp., a steel manufacturing company. She finds that the market is exhibiting the signs of a maturing market. She wants to revise the compensation package for her sales employee to adapt to the changing market conditions. In this case, Hannah is most likely to: increase base pay. provide a commission-based incentive plan. provide incentives based on new customer generation. include a significant incentive component.

increase base pay

Pay-for-knowledge plans do all of the following EXCEPT _____. make employees less expendable to their firms increase the probability of work being subcontracted out to nonunion organizations make each individual employee more valuable pay employees more for learning a variety of different jobs or skills

increase the probability of work being subcontracted out to nonunion organizations

The rising costs of Social Security have been covered by: increases in the maximum earnings base and the rate at which that base is taxed. reduction in Social Security benefits by providing market-driven options. progressive reduction in the coverage. welfare grants and annual supplements from Congress.

increases in the maximum earnings base and the rate at which that base is taxed

A health maintenance organization (HMO) pulls together a group of providers willing to provide services at an agreed upon rate in exchange for employers: limiting employees to these providers for health services. paying 30 percent of employee salary to the HMO. laying off all contingent workers who are not eligible for insurance. providing free child care assistance to employees.

limiting employees to these providers for health services

Which of the following is NOT a benefit that is required by statutory law? Workers' compensation Social Security Pension and retirement benefits Unemployment compensation

pension and retirement benefits

The _____ theory argues that executive pay rises to maintain the same relative relationship with the salaries of lower-level employees. economic approach team production social comparison agency

social comparison

The phenomenon where the nonunion management continues to enjoy the freedom from union "interference" in decision making, and the workers receive the rewards already obtained by their unionized counterparts is known as _____. automatic progression the spillover effect experience differential the equal mirror effect

the spillover effect

Executives, supervisors, and sales staff often receive special compensation treatment because _____. these jobs face conflicting demands these jobs are exempt under FLSA recruitment and retention are always difficult for these jobs these jobs are covered under the Sarbanes-Oxley Act

these jobs face conflicting demands