LER 428 Chapter 1

In which of the following ways can employees view compensation? (Check all that apply.)

As a reward for having done well in a job As an incentive to take or stay in a job and to try to perform well in that job As a return in an exchange between their employer and themselves As an entitlement for being an employee of the company

Identify a similarity between merit increases and merit bonuses.

Both are based on a performance rating.

Identify the ways in which compensation affects the success of managers. (Check all that apply.)

It is a major expense that must be managed. It is a major factor determining employee attitudes and behaviors and thus, organization performance.

Compliance

It is influenced by the basis used while making internal comparisons among employees.

What is the meaning of compensation in today's China?

It refers to how employees are being treated.

Identify common examples of income protection benefits provided by employers. (Check all that apply.)

Retirement programs Life insurance Medical insurance

Edward Lazear conducted an informative study on incentive and sorting effects in which he measured individual worker productivity before and after a glass installation company switched one of its plants from a salary-only system to an individual incentive plan. What were the findings of his study? (Check all that apply.)

Switching from a salary-only system to an individual incentive plan caused an increase in productivity. Approximately one-half of the increase in productivity was caused by less productive workers leaving and being replaced by more productive workers.

The sorting effect

The effect of differences in the types of pay strategies on the types of people who apply to and stay with an organization

The incentive effect

The extent to which pay influences individual and aggregate motivation among employees at a particular point in time

Identify the true statements about incentives. (Check all that apply.)

They are often known as variable pay. They are one-time payments.

Attora Inc., an advertising company, provides its employees with benefits that include paid vacations, work from home facilities, and access to an onsite child care center. Identify a true statement about these benefits.

They help employees balance their work and personal lives.

Which of the following is true of the income protection benefits provided by employers?

They help protect employees from the financial risks inherent in daily life.

Identify the true statements about the employees whose pay is referred to as salary in the United States. (Check all that apply.)

They include managers and professionals. Their pay is calculated at an annual or monthly rate.

Identify the ways in which shareholders influence executive compensation decisions. (Check all that apply.)

Through the election of directors in proxy votes Through shareholder proposals

Identify the ways in which pay can influence employee motivation and behavior. (Check all that apply.)

Via an incentive effect Via a sorting effect

Which of the following features of research should be kept in mind while deciding the usefulness and relevance of a research study? (Check all that apply.)

Whether there are alternate explanations Whether the research separates correlation from causation

Increments to base pay that are given to employees on the basis of their performance are known as _____.

merit increases

Which compensation objective has a company failed to meet if it misuses the statistics used to measure competitors' pay rates?

ethics

Stockholders who are not in favor of using stock to pay employees believe that _____.

granting employees too much ownership dilutes stockholder wealth

Wall Street financial services firms and banks rewarded employees for developing "innovative" new financial investment vehicles and for taking risks that helped them and their firms earn a significant amount of money by using _____.

incentive plans

In which of the following ways can employees view compensation? (Check all that apply.)

As an incentive to take or stay in a job and to try to perform well in that job As an entitlement for being an employee of the company As a reward for having done well in a job As a return in an exchange between their employer and themselves

Identify an aspect of compensation that may be viewed as a measure of justice in society.

Earning differentials between men and women

Identify the examples of programs that help employees balance their work and personal responsibilities. (Check all that apply.)

Flexible work arrangements Access to services to meet specific needs Time away from work

_____ force managers to consider the affordability of their compensation decisions.

Global and local competitive pressures

Which of the following statements about compensation may be seen as a reflection of equity or justice in society?

Individuals and businesses in the United States spend about 18 percent of U.S. economic output on health care.

Which of the following means ensuring that the right people get the right pay for achieving the right objectives in the right way?

management

Unlike merit increases, merit bonuses are _____.

paid in the form of a lump sum

A company that justifies comparatively low starting offers with assurances of large future pay increases is _____.

selling the present value of the future stream of earnings

In the United States, the pay for employees who are exempt from regulations of the Fair Labor Standards Act (FLSA) and hence do not receive overtime pay is referred to as

salary

An important motivation for risk taking among traders and others is _____.

the incentive system that often results in those who thrive under this incentive reaching top leadership positions

Why has Nucor Steel done well despite paying its workers higher than companies inside and outside of the steel industry?

It has much higher productivity than is usually seen in the steel industry.

Fairness

It is influenced by employees' comparisons of their pay to the pay of other employees in an organization.

Efficiency

It is influenced by employees' motivation to choose increased training and more responsibility in dealing with customers.

Managing compensation means _____.

identifying the impact of a policy, technique, or decision

Base wage

is the cash compensation that an employer pays an employee for the work performed

Which of the following is likely if a company pays its employees based on performance?

low turnover

Recognition and status, employment security, challenging work, and opportunities to learn are examples of _____.

relational returns

Which of the following caused companies like Chrysler and General Motors to go through bankruptcy?

Paying employees more than their competitors without corresponding advantages in productivity and quality

How do external competitiveness decisions affect compensation objectives? (Check all that apply.)

They ascertain that the pay is enough to attract and retain employees. They control labor costs to maintain the competitiveness of an organization's prices of products or services in a global economy.

Why do some stockholders support the use of stock to pay employees?

They feel that it creates a sense of ownership among employees that will improve performance.

Which policy decision of the pay model emphasizes paying for performance?

employee contributions

According to which of the following compensation objectives should an organization give importance to the way in which its results are achieved?

ethics

Internal alignment

is the policy that refers to comparisons among jobs or skill levels inside a single organization.

External competitiveness

refers to pay comparisons with competitors.

Susan works in a small biochemical corporation. Although her base wage and other forms of cash compensation are not very high, she gets personal satisfaction from the work she does and enjoys working with talented and knowledgeable professionals from her field of interest. These positives are examples of _____.

relational returns from work

Job losses (or gains) in a nation over time are partly influenced by _____ across nations.

relative labor costs and productivity

Which of the following can form the basis for a cost of living adjustment (COLA) to base wages? (Check all that apply.)

Changes in living costs Changes in experience or skill Changes in what other employers are paying for the same work

Identify the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act. (Check all that apply.)

Clawback provisions designed to allow companies to take back compensation from executives in some instances "Say on pay" that makes it obligatory for public companies to submit their executive compensation plan to a vote by shareholders

Identify a true statement about relative compensation costs and productivity rates across nations.

Countries like Mexico and China have much lower hourly compensation rates than the United States.

Identify the compensation objectives that pay systems should meet. (Check all that apply.)

Efficiency Fairness Ethics Compliance with laws and regulations

Which of the following are likely to be the focus of employees when they are given long-term incentives in the form of stock ownership? (Check all that apply.)

Return on investment Market share Return on net assets

Which of the following is true of allowances?

They often grow out of whatever is in limited supply.

True or false: A present-value perspective focuses on the value of a company's initial offers to job applicants.

This is false. A present-value perspective shifts the comparison of a company's initial offers to consideration of future bonuses, merit increases, and promotions.

True or false: Cost of living adjustments (COLAs) to base wages are becoming increasingly common nowadays.

This is false. Cost of living adjustments (COLAs) to base wages have become less common than in the past. This is because employers continually try to control fixed costs and link pay increases to individual and/or company performance.

True or false: Most managers read research because they find it relevant and useful while making compensation decisions.

This is false. Most managers do not read research. They do not subscribe to research journals because they find them to be impractical, irrelevant, and filled with jargon and esoterica.

True or false: The nature of the legal framework governing pay highlights the fact that pay is not important to employees in the employment relationship.

This is false. The extensive legal framework governing pay, including minimum wage, living wage, overtime, and nondiscrimination regulations, highlights the central importance of pay to employees in the employment relationship.

Allowances are a type of _____.

benefit