Chapter 14

Today, top executive pay is more than _____ times the pay of the average worker.

300

_____ curve expresses the relationship between years since last degree, performance, and salary.

A maturity

Which of the following is NOT a reason for companies to hire contingent workers?

Employees who accept the idea of bounded careers view contingent status as part of a fast-track developmental sequence.

Which of the following is the most popular executive perk offered by most companies?

Executive physicals

Engineers in almost all companies are treated as special compensation cases due to their education and training.

False

Incentive stock options may be deducted as a company expense.

False

Independent contractors always earn less than their permanently employed counterparts.

False

Members of boards of directors are not categorized as candidates for special compensation.

False

The most popular method of providing special compensation to supervisors is by paying overtime.

False

Unlike executives, scientists and engineers are less likely to receive lavish athletic facilities and large offices.

False

Which of the following is NOT a reason for the recent decline in the use of stock options in executive pay?

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

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 is likely to increase base salaries and decrease incentives.

A trend in sales force compensation is linking sales force compensation to customer satisfaction measures.

True

Compensation committees of boards of directors typically set executive salaries.

True

In maturing markets, companies focus both on performance-based pay tied to customer satisfaction and on greater.

True

In most cases, when a compensation consultant is called in to review the salary of a chief executive officer, regardless of how well the company is performing, the CEO's pay is raised.

True

Independent contractors generally are less expensive for employers as they receive no benefits.

True

The most common approach to motivating executives to make decisions that are in the best interests of stockholders is _____.

a long-term incentive plan using stock options

A useful tool for determining the true worth of an entire executive compensation package is _____.

a tally sheet

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:

be increased in order to retain her.

In recent years, some firms have tried to deal with the plateau effect and also accommodate the different career motivations of mature scientists and engineers through a(n) _____.

dual-career ladder

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

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.

The biggest trend in supervisory pay centers on _____.

increased use of variable pay

Annual bonuses often play a major role in executive compensation and are primarily designed to _____.

motivate better short-term performance

A(n) _____ awards cash or stock if specific goals are achieved.

performance share plan

The _____ theory argues that executive pay rises to maintain the same relative relationship with the salaries of lower-level employees.

social comparison