Deck 14: Compensation of Special Groups

Question 1

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

A)the program evaluation and review technique (PERT)
B)a tally sheet
C)a Gantt chart
D)the graphical evaluation and review technique (GERT)

Answer 1

B

Question 2

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) _____.

A)individual-career ladder
B)alternative career path
C)military-style career ladder
D)dual-career ladder

Answer 2

D

Question 3

At the time it is granted, which of the following has no tax implications for an executive?

A)Phantom stock plans
B)Incentive stock options
C)Stock appreciation rights
D)Performance share/unit plans

Answer 3

B

Question 4

The differential between supervisors' base pay and their highest paid subordinate is typically _____ percent.

A)0 to 5
B)5 to 30
C)30 to 50
D)50 to 90

Question 5

Which of the following is NOT one of the clauses relating to the benefits employers can provide executives?

A)Benefit plans must cover 80 percent of employees.
B)Benefit plans must be determinable.
C)Benefit plans must meet specific vesting requirements.
D)Average value of benefits for low-paid employees must be at least 90 percent of that for highly paid employees.

Question 6

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

A)1,500
B)2,000
C)900
D)300

Question 7

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

A)economic approach
B)team production
C)social comparison
D)agency

Question 8

Executives, supervisors, and sales staff often receive special compensation treatment because _____.

A)these jobs face conflicting demands
B)these jobs are exempt under FLSA
C)recruitment and retention are always difficult for these jobs
D)these jobs are covered under the Sarbanes-Oxley Act

Question 9

Nonqualified stock options require _____.

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

Question 10

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

A)high base salaries with few bonuses
B)average base salaries with significant firm performance bonuses
C)a long-term incentive plan using stock options
D)average base salary with performance-based perks

Question 11

A recent article analyzing the results from over 100 executive pay studies shows that the best predictor of executive pay, by far, is _____.

A)firm size
B)the number of insiders on the board of directors
C)the industry in which the firm operates
D)firm performance

Question 12

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

A)There has been a growing pressure to expense stock options in annual reports.
B)In a falling market, stock options are underwater-the market price is below the exercise price.
C)Financial Accounting Standard Number 313 raises the cost of using stock options.
D)Stock options do not pay for executive performance.

Question 13

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

A)motivate better short-term performance
B)reduce overtime pay
C)decrease pay differentials between supervisors and subordinates
D)increase employee turnover

Question 14

All of the following EXCEPT _____ would be considered a special compensation group.

A)sales staff
B)contingent workers
C)unpaid interns
D)professional employees

Question 15

The biggest trend in supervisory pay centers on _____.

A)increased use of variable pay
B)payment of wages that equal subordinate pay
C)paying a wage that is above the highest paid superior
D)payment of higher wages without benefits

Question 16

The _____ component of executive compensation has grown the most since 2012.

A)long-term incentives
B)bonus
C)short-term incentives
D)base salary

Question 17

In which of the following situations would the engineering jobs be most likely treated as a special compensation group?

A)Mechanical engineers employed by a large city corporation
B)Computer engineers employed at a software firm
C)Biomolecular engineers employed at a farm equipment manufacturer
D)Acoustical engineers at a waste disposal company

Question 18

A(n) _____ awards cash or stock that is determined by an increase in stock price at a fixed future date.

A)phantom stock plan
B)incentive stock option
C)restricted stock plan
D)nonqualified stock option

Question 19

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

A)nonqualified stock option
B)incentive stock option
C)restricted stock plan
D)performance share plan

Question 20

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

A)Executive physicals
B)Payment of club dues
C)Family spousal travel
D)Corporate housing

Question 21

The best predictor of CEO pay is performance of the company.

Question 22

With easily sold products:

A)companies prefer a more aggressive sales force.
B)the base compensation tends to be more important.
C)the incentives provided in the form of commissions tend to be more important.
D)companies tend to set lower sales targets.

Question 23

If improved account retention became a major focus of attention, the performance measure stressed would be _____.

A)gross margin on sales or price per unit
B)percentage account erosion
C)a volume measure
D)a customer satisfaction index

Question 24

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

Question 25

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

Question 26

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

Question 27

Working through a temporary-help agency usually means:

A)high recognition for the work done.
B)lower work stress in comparison to permanent employees.
C)higher benefits in comparison to permanent employees.
D)low pay in administrative or day labor positions.

Question 28

ERISA and the tax code specify that the average value of benefits for low-paid employees must be at least 75 percent of those of highly paid employees.

Question 29

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:

A)remain the same as CEO salary is based only on performance.
B)be withheld and paid at a later date as the company is doing poorly.
C)be increased in order to retain her.
D)remain the same as the company is doing poorly.

Question 30

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.

Question 31

Popular stereotypes of salespeople characterize them as being heavily motivated by _____.

A)financial compensation
B)personal growth and job security
C)recognition and appreciation
D)promotional opportunities

Question 32

Compensation committees of boards of directors typically set executive salaries.

Question 33

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:

A)increase base pay.
B)provide a commission-based incentive plan.
C)provide incentives based on new customer generation.
D)include a significant incentive component.

Question 34

When designing a sales compensation plan, it should be kept in mind that:

A)salespeople rank recognition as their number-one motivator.
B)salespeople under an incentive system will view customer service as an imposition.
C)compensation systems are independent of the nature of a product or service.
D)commissions for sales volume reduces the incentive to sell.

Question 35

Contingent workers are usually considered candidates for special compensation.

Question 36

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

Question 37

Incentive stock options may be deducted as a company expense.

Question 38

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?

A)NaxWell will set lower sales targets for its employees.
B)NaxWell is likely to increase base salaries and decrease incentives.
C)NaxWell is likely to lower its executive compensation in order to increase stock price.
D)NaxWell will hire only contingent workers.

Question 39

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

A)Contingent workers help save costs.
B)Employees who accept the idea of bounded careers view contingent status as part of a fast-track developmental sequence.
C)Such employment offers added flexibility to employers.
D)Companies hire contingent workers as a way to insulate themselves in a volatile economy.

Question 40

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

A)The Phillips
B)The marginal productivity
C)A tenure
D)A maturity

Question 41

Independent contractors always earn less than their permanently employed counterparts.

Question 42

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.

Question 43

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

Question 44

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

Question 45

Describe how executives ensure themselves high compensation.

Question 46

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.

Question 47

Who are special groups? What are the characteristics that special groups share?

Question 48

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

Question 49

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

Question 50

List the basic components of most executive compensation packages.

Question 51

What is a tally sheet and what is it used for?

Question 52

Compensation packages for salespeople must be competitive because salespeople tend to compare their pay with competitors.

Question 53

Explain any one element of an executive compensation package in detail.

Question 54

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

Question 55

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.