Compensation Exam Review

The duration of short-term international assignments is usually ___ or less

1 year

Employees in China who have worked more than 20 years are entitled to paid leave of:

15 days

What is the length of compassionate care leave provided by the Canadian government to take care of a seriously ill family member?

26 weeks (26 gives credit as being correct but the truth is it's actually 8 weeks)

Involuntary part-time employees work fewer than _______ hours per week

35

Executives must have _______ percent of ownership in a firm before they are classified as a highly compensated employee by the IRC.

5

An employer-sponsored retirement plan is considered top-heavy when the accrued benefits of the key employees exceed​ ________ percent of the accrued benefits of all employees.

60

Which of the following would be entitled to receive an international compensation package?

A U.S. citizen who is working at the Italian office of a U.S. company

The total bonus pool is considered when using the predetermined allocation bonus for an executive. What is the key factor that determines the size of the total bonus pool?

A company's profits

Miranda, the CEO of TVX Enterprises, has a compensation arrangement in which the TVX board of directors promises to pay her a bonus in the form of the equivalent of either the value of TVX shares or the increase in that value over a period of time. Which term refers to Miranda's compensation arrangement?

A phantom stock plan

For employees who participate in job sharing, which of the following is a likely benefit?

Ability to participate in an employee retirement program

Which statement regarding executive compensation is TRUE?

Academic research is not decisive regarding a connection between executive compensation and company performance.

The idea behind deferred compensation for an executive is to:

Align the executive's and shareholders' interests in the long term.

The current executive core compensation consists of:

Annual base pay and bonuses

Based on the criteria for key employees, which of the following positions would be considered a key employee?

CEO

Which of the following developing Asian economies has the highest pay rate?

China

Which of the following best explains the reason for labor shortages in China?

China's one-child policy restricted population growth and led to an aging population

All of the following are true of ethical considerations regarding executive pay:

Compensation in equity plans for CEOs is about 50%. Labor unions argue pay discrepancies between CEOs and non-CEOs are unjust. Fast food cook earn .09% of what an executive makes. Many BoD and compensation professions argue that high pay is necessary to attract executives.

Sonia works 40 hours each week at a publishing company. She works Monday through Thursday from 8:00 a.m. until 6:00 p.m. Which term best describes Sonia's work arrangement?

Compressed workweek schedule

Which of the following is the most accurate description of why labor union opposition to contingent employees is unlikely to change in the near future?

Contingent employees are paid less and have fewer benefits.

___ refers to a general slowdown in economic activity

Economic recession

Which statement about the annual base pay for an executive is TRUE?

For most executives, annual base pay represents a small part of their total compensation.

____ are monetary payments above and beyond regular base pay that are given for international assignments that last longer than one year

Foreign service premiums

Historically, after each recession, what has been true regarding productivity and real compensation?

Gains in real compensation have been substantially less than gains in producitivity

What is the term that describes the market value of all goods and services produced in a country in a given year?

Gross domestic product

An officer in an organization is someone who ______.

Has the title and authority of an officer.

Flex work schedules are best for companies that want to promote differentiation strategies. This is because flex schedules:

Help employees work without being distracted by personal matters

Why are Chinese policy makers supportive of higher wages?

Higher wages create a consumer-demand based economy, rather than an export-centered economy

Which method compensates expatriates the same as if they were doing similar work in the United States?

Home country-based method

How do employers benefit from compressed workweeks?

Improve recruitment and retention success

Which statement is TRUE about the Brazilian economy?

In Brazil, all benefits granted by employers are legally part of employee salaries and cannot be abolished.

What has been the subject of current debates in Canada?

Increasing health care costs

Which authority provides the criteria for defining an executive?

Internal Revenue Code

Which statement is true of the consequences of a higher threshold for overtime pay for employees?

It is hard to predict how employers would react to higher thresholds for overtime pay

Why have many U.S. companies in recent years moved their manufacturing facilities to China?

Labor is less costly in China

What is one reason that labor is less costly in Mexico than in the United States?

Labor laws in Mexico do not give employees substantial bargaining power.

John has an MBA in finance but is currently working as an administrative assistant at $15 an hour. According to labor terminology, John's employment status can best be described as:

Malemployment

All of the following are true of ethical considerations regarding executive pay EXCEPT?

Most CEOs who are hired from within make more money than those hired from outside the company.

It makes sense to use the headquarters-based method in designing an international compensation package when an employee is:

Moving from one country to another and rarely works in the home country

Many U.S. manufacturing companies have established facilities in Asian countries and in Mexico because these two locations offer:

Much less expensive labor

Basic medical and hospital care in Canada is:

Paid from general federal taxation and from provincial taxes

For the employee, flexible workweek schedules have the greatest impact on:

Paid time-off benefits

Which is true when comparing non-U.S. CEOs with U.S. CEOs?

Pay mix is substantially different among CEOs in various countries.

Expatriates who earn higher incomes in the United States generally receive higher incomes and allowances to maintain their lifestyle overseas. However, this also means:

Paying higher taxes on the income and allowances

Which statement about Asian economies is TRUE?

Services are a significant source of economic growth in the Indian economy

Which is TRUE of pension and health benefits in India?

State governments in India arrange for health care

What are the three main sections of the quarters allowance that the U.S. Department of State uses for determining housing and utilities allowance?

Survey date, exchange rate, and annual allowance by family status and salary range

Due to a potential conflict of interest, what is the primary consideration for executive consulting firms who suggest executive pay when refusing to do other work for management?

The public image of the consulting firm

Which statement is FALSE regarding the minimum wage in China?

There is a national minimum wage rate that is set by the central government

According to the U.S. Bureau of Labor Statistics, what can be said about the current trend in the labor force in the United States?

There will be greater diversity in the labor force

How do companies create an ownership interest for an executive?

Through granting stock and stock options

Executives are awarded short-term incentive compensation. What is the reason for giving short-term incentive compensation to executives?

To reward executives for meeting intermediate performance criteria.

What has been one of the key challenges for the central government in China?

To sustain adequate job growth for the massive population

Which of the following is TRUE about U.S. Citizens paying taxes while working overseas for a U.S. corporation?

U.S. citizens are subject to the Federal Unemployment Tax Act (FUTA).

Offering relevant benefits to employees is important for a company because doing so can lead to:

a positive return on investment

Part-time employees are eligible for retirement benefits if they _____ and have ____

are 21 years of age or older; 1,000 hour logged in a 12-month period

Unions in the public sector feel that flex schedules:

are acceptable, because they strengthen union bargaining power

Minimum wage rates in India:

are set by the government in some sectors and are a collective agreement in others

One of the unintended consequences of raising the overtime pay threshold for employees could be that employees will:

be monitored more closely

When faced with higher employment costs due to an increase in the minimum wage, it is possible that many firms would most like cut ____. which is significant part of total compensation

benefits

Minimum wage in Germany is established:

by the collective bargaining process

U.S. companies designing international compensation packages divide the total package into three broad categories, which are:

core compensation, benefits, and enhanced benefits

Companies _____ allowances for discretionary income expenditures for which expats remain responsible in the United States.

do not provide

Many companies use ___ as the pay referent group because virtually all expatriate employees eventually return to the United States.

domestic employees

The balance sheet approach is most appropriate for setting a U.S. expatriate's compensation package when the:

expatriate's next assignment will be in the U.S.

Technically, when contingent workers are placed in an organization, they are:

legally accountable to the temporary employment agency that hired them

When an expatriate in Japan receives less pay in the local currency than they would if they were paid in U.S. dollars, the expatriate is facing:

loss in purchasing power

Successful international compensation programs should:

minimize an employee's financial risk while overseas

Flextime schedules allow workers to:

modify their work schedules within the limits set by the employer

Most economists prefer using ___ when evaluating per capita welfare and when comparing living conditions across countries

purchasing power parity exchange rates

International and domestic benefits differ in terms of allowances and reimbursements. The difference for expatriates is primarily due to higher costs of living and housing, _____, and _____

relocation allowances; educational allowances for expatriates' children

One of the outcomes of globalization is that companies now send U.S. employees overseas to establish:

satellite plants and offices for U.S. companies

Job sharing at work is an arrangement where:

two or more part-time employees perform a single full-time job

Under the old welfare system in China, workers:

were treated as the property of the state

Higher rates of unemployment after a recession leave employees:

with less bargaining power due to a greater supply of workers

Canadian pension plans outside of Quebec are funded:

with matching contributions by employers and employees

The dual employer doctrine law states that temporary workers have a right to:

workers' compensation

The Mexican social security system is funded by:

workers, employers, and the government

How do executives receive an income tax benefit by participating in incentive stock option plans?

Executives do not pay any taxes until they sell their stock, and when they do sell, the tax rates are lower than their income tax.

Which of the following describes the agency problem?

Executives make decisions in their own self-interest.

What is the key difference between target plan bonus and predetermined allocation bonus?

Predetermined allocation bonuses are fixed; target plan bonuses are not.

Which statement about temporary employment agencies is TRUE?

Temporary agency fees are based on a percentage of a placement's pay rate

What is the most likely reason that underemployed workers will have low future earnings?

Underemployed workers generally work part-time, and employers provide little training to part-time employees

Why is underemployment a potential concern for an economic recovery?

Underemployment means low wages in the present and low earnings in the future

What is the overall view of labor unions regarding companies' use of contingent workers and flex schedules?

Unions generally do not support contingent and flex work schedules.

One of the reasons given for the greater compensation-productivity gap after a recession is that

employers want to increase their profits after a recession by lowering wages

All of the following are components of the standard benefits package for an expatriate EXCEPT:

entertainment allowances

Labor and employment laws in Canada:

fall within provincial jurisdiction

Temporary workers are primarily hired by companies to:

fill a need during peak times

All of the following factors would be influential in determining benefit preference for employees EXCEPT whether the employee:

has technical or nontechnical skills

The North American Agreement on Labor Cooperation (NAALC) was created to:

improve labor conditions in the United States, Canada, and Mexico

When considering executive compensation, boards of directors are theoretically representing the interests of:

shareholders

Why are contingent workers perceived as a threat by most labor unions?

Contingent workers tend to threaten members' job security.

Some globally focused companies, such as GE and McDonald's, maintain a strong international presence. Such firms support expatriates by offering:

Corporate universities that prepare soon-to-be expatriates to work abroad

Which of the following would contain detailed information on the compensation of a firm's CEO and Named Executive Officers?

Definitive Proxy Statement

Which is TRUE of Canadian wage rates and benefits?

Employees are entitled to between 6 and 10 holidays, 2 weeks of vacation, and a sum of money as vacation pay. (this gives credit as the correct answer, but the truth is it's 8-9 holidays, not 6-10.)

Which of the following is a paid time-off benefit in Germany?

Employees receive regular pay during illness for up to 6 weeks.

Underemployment occurs when:

Employees who want to work full-time must work part-time due to a poor economy

Which of the following is an employment stipulation according to the laws of EU member states?

Employers must give employees a written document specifying the terms of the employment contract

When referring to executive compensation, what is meant by the term pay-for-failure?

Executives receive pay for nonperformance and are given generous amounts to leave the company.

Which of the following is a U.S. citizen employed by a U.S. company with a work assignment outside the United States?

Expatriate

What criteria are used by the U.S. department of state for identifying hardship locations?

Extraordinarily difficult living conditions, excessive physical hardships, and notably unhealthy conditions

Compensation consultants determine executive pay based on a strategic analysis of internal and external factors of an organization. The most important internal factor in determining executive compensation is the:

Financial condition of the company

Which of the following statements is FALSE regarding flexible work schedules?

Flexible work schedules can reduce productivity.

Leasing employees to a client company is common in which type of industry?

Food

What do many economists assert could be the result of a minimum wage hike for the economy?

Prices of goods and services could increase as minimum wage increases

What has been the effect on wages in the United States, Canada, and Mexico since the passing of NAFTA?

Real wages have increased in the three countries since the passage of NAFTA

What are the main indicators of an economic recession?

Reduced GDP and increase unemployment

From an employer's perspective, job sharing is likely to result in:

Reducing employee training costs

Which of the following BEST describes repatriation?

Repatriation is the process of making the transition from an international assignment to a domestic assignment

Which statement about returning expatriates is false?

Returning expatriates find it easy to participate with collaborative teams

Zachary has a full-time position with an accounting firm. Zachary works in the firm's office when he needs to attend meetings, but the majority of his work is accomplished in his home office. Which term best describes Zachary's work arrangement?

Telecommuting

What is the current trend in terms of wage rates in China?

The Chinese government has been increasing the minimum wage rate

Which is TRUE of seasonal workers?

The FLSA's minimum wage and overtime provisions do not apply to some seasonal workers.

Which statement about Mexico is FALSE?

The Mexican economy is mainly new industry

Which of the following is TRUE about expatriates receiving a goods and services allowance?

The allowance uses the Washington, D.C., area for cost comparisons

Stock compensation plans generally increase the ownership interest of an executive. What increases the value of a stock?

The gain in company performance.

Which of the following is NOT a labor force trend projected for the future?

The labor force participation rate for younger works is expected to increase

Which is true of the wage rates of underemployed workers?

The mean hourly wage rate of underemployed workers is less than the mean wage rate of those who are not underemployed

Which country in South America has large oil reserves which have made that country an important player in world trade?

Venezuela

Which group of workers chooses to work fewer than 35 hours per regularly scheduled workweek?

Voluntary part-time employees

How do companies know when compensation expenditures become excessive?

When compensation expenditure is greater than quantity and quality of labor output.

One of the advantages of hiring contingent workers is that it prevents groupthink from occurring in the workplace. Which of the following best describes groupthink?

When groups share the same mind-set regarding issues

What makes employees more likely to endorse employer-sponsored benefits?

When the benefits fulfill the needs and preferences of employees

What is the focus of the economic realities test for independent contractors?

Whether the worker qualifies as an employee

According to the U.S. Bureau of Labor Statistics, which race will show the slowest growth rate during the period 2012-2022?

White Non-Hispanics

The Chinese economy in the last couple of decades has:

shifted from a centrally planned system to a market-based system