Chapter 14

Question 1

Executives, supervisors and sales staff often receive special compensation treatment because these jobs ___________
A) are strategically important to the organization
B) require special treatment under the Worker Economic Opportunity Act
C) are exempt under FLSA
D) are covered by the Sarbanes-Oxley Act

Answer 1

are strategically important to the organization

Question 2

Independent contractors typically earn more than other contingent workers.
A) TRUE
B) FALSE

Answer 2

TRUE

Question 3

The biggest challenge in sales compensation design is making the forecast of expected sales as accurate as possible.
A) TRUE
B) FALSE

Answer 3

TRUE

Question 4

\_\_\_\_\_\_\_ theory argues that executive compensation should be designed to ensure that executives have the best interests of the stockholders in mind when they make decisions.
	A)	Social comparison
	B)	Agency
	C)	Economic valuation
	D)	Institutional

Answer 4

Agency

Question 5

The percent of executive compensation in base salary and short-term bonuses was \_\_\_\_\_\_\_ in 2008.
	A)	20
	B)	30
	C)	40
	D)	55

Answer 5

40

Question 6

One reason why use of traditional stock options is declining is recent illegal options backdating.
A) TRUE
B) FALSE

Answer 6

TRUE

Question 7

The \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ is contributing to the decline of the use stock options in executive compensation.
	A)	1993 Revenue Reconciliation Act
	B)	Dodd Frank Act
	C)	Black–Scholes Act
	D)	IRS Section 123

Answer 7

Dodd Frank Act

Question 8

Customer satisfaction indices are increasingly popular because of a greater emphasis on quality.
A) TRUE
B) FALSE

Answer 8

TRUE

Question 9

For \_\_\_\_\_\_\_\_\_\_\_\_, the design of compensation plans is influenced by	 nature of the people in the job, competitor practices, market maturity and economic environment.
	A)	executives
	B)	supervisors
	C)	sales staff
	D)	scientists and engineers

Answer 9

sales staff

Question 10

Which of the following is not a contingent worker?
A) an on-call worker
B) a regular part-time worker
C) an independent contractor
D) a worker hired through a temporary help agency

Answer 10

a regular part-time worker

Question 11

Which of the following is a type of conflict faced by top management?
A) Often go for extended periods in the field with little supervision
B) Stockholders want healthy return on investment
C) May be torn between goals, objectives, and ethical standards of their profession
D) Caught between upper management and employees

Answer 11

B)Stockholders want healthy return on investment

Question 12

Beyond typical benefits, many executives also receive additional life insurance, exclusions from deductibles for health–related costs, and supplementary pension income exceeding the maximum limits permissible under \_\_\_\_\_ guidelines for qualified pension plans.
	A)	HIPAA
	B)	COBRA
	C)	ERISA
	D)	FMLA

Answer 12

C)ERISA

Question 13

This 1993 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.
A) The Revenue Reconciliation Act
B) The Employee Retirement Income Security Act
C) The Internal Revenue Service Restructuring and Reform Act
D) The Securities Act

Answer 13

A)The Revenue Reconciliation Act

Question 14

According to this Act, the category of professionals includes any person who has received special training of a scientific or intellectual nature and whose job does not entail more than a 20 percent time allocation for lower-level duties.
A) The Securities Act
B) The Civil Rights Act
C) The Contract Work Hours Standards Act
D) The Fair Labor Standards Act

Answer 14

D)The Fair Labor Standards Act

Question 15

An organization might use a volume measure such as number of units, orders, invoices, or cash received if the business goal is \_\_\_\_\_.
	A)	to increase sales growth
	B)	greater emphasis on quality
	C)	profit improvement
	D)	improved account retention

Answer 15

A)to increase sales growth

Question 16

A typical board of directors comprises 3 outside (the company) and 10 inside directors, each having a term averaging three years.
A) True
B) False

Answer 16

B)False

Question 17

In the last few years companies increasingly have been pressured to expense stock options in their annual reports, showing stockholders the real cost of options.
A) True
B) False

Answer 17

A)True

Question 18

One study found that environmental performance is an important determinant of CEO pay in polluting industries.
A) True
B) False

Answer 18

A)True

Question 19

Scientists and engineers receive incentives beyond base pay that tend to average more than 10 percent of pay.
A) True
B) False

Answer 19

B)False

Question 20

In a recession environment, companies need to react to the decreasing level of sales by focusing more on the mid- and low-level performers.
A) True
B) False

Answer 20

B)False

Question 21

What are the 5 components to Executive Compensation packages?

Answer 21

1. base pay
2. short-term incentives
3. long-term incentives
4. employee benefits
5. perquisites (perks)

Question 22

What are the 6 factors influencing the design of a sales compensation plan?

Answer 22

1. nature of people
2. organizational strategy
3. market maturity
4. competitor practices
5. economic environment
6. product to be sold