Chapter 14 - MGT 461

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

Today, top executive pay is more than _____ times the pay of the average worker. 1,500 2,000 900 300

300

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

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

A maturity

_____ 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 NOT one of the clauses relating to the benefits employers can provide executives? Benefit plans must cover 80 percent of employees. Benefit plans must be determinable. Benefit plans must meet specific vesting requirements. Average value of benefits for low-paid employees must be at least 90 percent of that for highly paid employees.

Average value of benefits for low-paid employees must be at least 90 percent of that for highly paid employees.

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.

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.

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

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) _____. individual-career ladder alternative career path military-style career ladder dual-career ladder

dual-career ladder

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

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

The most recent trend in executive compensation is an increased use of stock options.

false

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

false

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

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

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

The _____ component of executive compensation has grown the most since 2012. long-term incentives bonus short-term incentives base salary

long-term incentives

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(n) _____ awards cash or stock that is determined by an increase in stock price at a fixed future date. phantom stock plan incentive stock option restricted stock plan nonqualified stock option

phantom stock plan

Nonqualified stock options require _____. purchase of stock at a stipulated price, not conforming with the Internal Revenue Code cash or stock award to be determined by an increase in stock price at a fixed future date cash or stock award to be determined by an increase in stock price during any time chosen in the option period grant of stock at a reduced price with the condition that it may not be sold before a specified date

purchase of stock at a stipulated price, not conforming with the Internal Revenue Code

When designing a sales compensation plan, it should be kept in mind that: salespeople rank recognition as their number-one motivator. salespeople under an incentive system will view customer service as an imposition. compensation systems are independent of the nature of a product or service. commissions for sales volume reduces the incentive to sell.

salespeople under an incentive system will view customer service as an imposition.

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

With easily sold products: companies prefer a more aggressive sales force. the base compensation tends to be more important. the incentives provided in the form of commissions tend to be more important. companies tend to set lower sales targets.

the base compensation tends to be more important.

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

At least for high-skilled contingent workers, it is increasingly popular to view careers as a series of opportunities to acquire valuable increments in knowledge and skills.

true

Compensation committees of boards of directors typically set executive salaries.

true

Contingent workers are usually considered candidates for special compensation.

true

In a recession environment, companies need to react to the decreasing level of sales by rewarding top-level performers that achieve high levels of sales despite the economic downturn.

true

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

true

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

true

Organizations rely very heavily on external market data in pricing scientists' and engineers' base pay.

true

The 1993 Revenue Reconciliation Act limited employer deductions for executive compensation to $1 million and capped the amount of executive compensation used in computing contributions to and benefits from qualified retirement plans.

true

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

unpaid interns

A useful tool for determining the true worth of an entire executive compensation package is _____. the program evaluation and review technique (PERT) a tally sheet a Gantt chart the graphical evaluation and review technique (GERT)

a tally sheet