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85) By law, what is the minimum percentage of assets that an employee stock ownership plan
(ESOP) must invest in its company's stock?
A) 10
B) 26
C) 51
D) 60
E) 76
86) What is the difference between stock options and an employee stock ownership plan
(ESOP)?
A) Stock options carry significant risk, whereas ESOPs are risk-free.
B) Stock options are usually granted to company executives, whereas ESOPs are provided to all
employees.
C) In stock options, stocks are placed into a trust, whereas ESOPs give employees the right to
buy a certain number of shares of stock.
D) Under stock options, employees can sell their stocks, whereas ESOPs do not allow employees
to sell their stocks.
E) Earnings from stock options are exempt from income taxes, whereas earnings from ESOPs
are taxable.
87) What is a reason for the popularity of employee stock ownership plans (ESOPs)?
A) ESOPs provide tax advantages to employers.
B) ESOPs provide very high risk-free retirement income.
C) Employees can use ESOPs to buy their company during financial crises.
D) ESOPs must invest at least 51 percent of their assets in the company's own stocks.
E) The employees are provided with many more shares of stock than they actually own.
88) Employee stock ownership plans (ESOPs) are attractive to employers. Along with tax and
financing advantages, ESOPs give employers a way to build pride in and commitment to the
organization. Which statement weakens this argument?
A) Employees are not allowed to participate in general body meetings as shareholders.
B) The stocks within the trust are too widely diversified to earn high returns.
C) The stock earnings are taxed at high rates.
D) Employees are forced to return the stock profits to the organization.
E) Risks involved will directly affect employees' retirement income.
89) A major problem with ESOPs is that
A) they carry a significant risk for employees.
B) employees are not allowed to participate in votes by shareholders.
C) the stocks within the trust are too widely diversified to earn high returns.
D) any earnings from the trust holdings are taxed at an extremely high rate.
E) they result in reduced profitability for the employees.
90) What is the method where a combination of performance measures directed toward the
company's long- and short-term goals are used as the basis for awarding incentive pay?
A) merit pay
B) profit sharing
C) gainsharing
D) balanced scorecard
E) Scanlon plan
91) InfoTech Inc., a sales and marketing company, wants to combine the advantages of different
incentive-pay plans and help employees understand the organization's goals. Which plan will
help the company accomplish this goal?
A) the Scanlon plan
B) a balanced scorecard
C) a dashboard
D) an employee stock ownership plan
E) a differential piece rate system
92) Which of the following best describes a balanced scorecard?
A) a combination of performance measures directed toward the company's long- and short-term
goals and used as the basis for awarding incentive pay
B) a performance review process where the organization collects feedback from customers,
managers, and subordinates; assigns ratings; and lists them on the company's performance card
C) an arrangement in which the organization distributes shares of stock to all its employees by
placing the stock into a trust
D) a type of incentive pay in which payments are a percentage of the organization's profits and
do not become part of the employees' base salary
E) a system designed to measure the performance of HR personnel based on the quality of
recruitment
93) Organizations customize their balanced scorecards according to their
A) earnings.
B) profits, benefits, and incentives.
C) markets, products, and objectives.
D) objectives as set by the organization's CEO and board of directors.
E) research on what drives employee motivation.
94) What is an advantage of using balanced scorecard?
A) It eliminates the need to communicate the details of an incentive plan to the employees.
B) It eliminates managerial effort when providing incentives to employees.
C) It increases the pay for all employees in the organization regardless of their performances.
D) It reduces employee stress because it does not focus on financial targets.
E) It helps employees understand the organization's goals.
95) An organization wants to provide its employees information about what its goals are and
what it expects employees to accomplish. It is planning to implement an incentive plan that helps
employees understand the organization's goals. Which plan should be used by this organization?
A) a retention bonus
B) a piecework rate system
C) a merit pay system
D) the Scanlon plan
E) a balanced scorecard
96) Employee participation in pay-related decisions can be part of a general move toward
A) employee empowerment.
B) centralized decision making.
C) self ownership.
D) high power distance.
E) federalism.
97) Joe, a supervisor, believes that employees should participate in pay-related decisions. He
says that it will most likely help in the success of incentive plans, and the plans are more likely to
influence employee behavior as desired. Which statement weakens this argument?
A) Employees will make decisions that are in their best interests at the expense of the
organization's interests.
B) It is difficult to monitor an employee's work output when decisions are made by the
employee.
C) When employees become more involved in pay decisions, they neglect the work assigned to
them.
D) Employees should be a part of the human resource department to be involved in pay-related
decisions.
E) It will have a negative impact on the top-level management of the company.
98) If employee participation in making pay-related decisions is encouraged in an organization,
then
A) administering the plans becomes simple.
B) the organization's interests can be best protected.
C) the cost borne by the organization decreases.
D) monitoring performance becomes difficult.
E) the incentive plan has more chances of being successful.
99) Kotochi and Sons, a marketing company, has implemented a few incentive plans to motivate
its employees. The organization encourages employees to learn new skills and cooperate with
others. Which condition will contribute to employees' feeling that the organization's incentive
pay plans are fair and something to pursue?
A) Employees must be able to understand the requirements of the incentive pay plan.
B) Equal incentives should be offered to all the employees of the organization.
C) Employees must be the key decision makers when creating incentive pay plans.
D) The company should not inform the employees about incentive plan changes.
E) Employees should make decisions that are only in favor of their interests.
100) Beyond Space Aeronautics is developing a profit-sharing plan. Ben, the human resource
manager, assumes the employees are excited to participate in this start-up company's success.
However, a supervisor tells Ben about anxiety surrounding a rumor that employees will lose
money if the company has a bad year. How should Ben address this problem with employee
morale?
A) by recalling that employees are also motivated by factors other than pay
B) by removing non-management employees from the team designing the incentive plan
C) by conducting meetings to teach about profit sharing and how employees will benefit
D) by reminding employees that rumors are against company policy
E) by shutting down the company's intranet to prevent further spreading of rumors
101) The human resource, accounting, and legal departments of Glorious Software, a company
with locations in seven states plus Europe, are working together on developing a profit-sharing
plan. Which option for communicating with employees about the plan would be the most
practical and effective?
A) Call a meeting of all the employees to discuss the plan face-to-face.
B) Set up a balanced scorecard to measure opinions about the plan.
C) Ask employees not to engage in rumors.
D) Post descriptions and videos on the company's intranet.
E) Hold off on any communications until all employees can be brought together.
102) Most pay-related communications come through
A) the company newsletter.
B) one designated company speaker.
C) rumors between employees from various departments.
D) an employee's annual review.
E) individual discussions between employees and their supervisors.
103) Executive pay at Ashcroft Inc., a manufacturing company, includes bonuses based on the
year's profits or other measures related to the organization's goals. Sometimes, to gain tax
advantages, the bonus is made part of executives' retirement plans. What is being exemplified in
this scenario?
A) long-term incentives
B) balanced scorecards
C) piecework plans
D) employee stock ownership plans
E) short-term incentives
104) Global Development Corp. pays its executives short-term incentives for meeting financial
targets. What could be included in this incentive pay?
A) bonus for meeting the return on investment goal for last year
B) bonus for meeting a target for greater customer satisfaction
C) stock options
D) stock purchase plans
E) merit pay
105) Which of the following is a long-term incentive?
A) sales commission
B) group bonus
C) merit pay
D) stock option
E) piece rate
106) Kokan Inc., a marketing company, includes stock options and stock purchase plans in
executive pay. Executives at the company will want to do what is best for Kokan because that
will cause the value of the stock to grow. What is being exemplified in this scenario?
A) Scanlon plan
B) balanced scorecard
C) long-term incentives
D) merit plan
E) short-term incentives
107) How does the balanced scorecard help organizations deal with unethical behaviors of
executives?
A) It allows companies to deduct executive pay that exceeds $1 million.
B) It ensures that by rewarding the achievement of a variety of goals, temptation on the
executive's part to gain bonuses by manipulating data are reduced.
C) It encourages executives to hold on to their stock options when the company is undergoing
financial problems.
D) It forces executives to focus on the company's long-term success because ESOP funds are
guaranteed by the Pension Benefit Guarantee Corporation.
E) It mandates that an ESOP invest at least 51 percent of its assets in the company's own stock.
108) The ________ has required companies to more clearly report executive compensation levels
and the company's performance relative to that of competitors.
A) National Credit Union Administration
B) Financial Industry Regulatory Authority
C) Commodity Futures Trading Commission
D) Securities and Exchange Commission
E) Omnibus Budget Reconciliation Act
109) What are the different types of piecework rates? Explain each of them.
110) What are the advantages and disadvantages of a merit pay system?
111) What are the different types of pay for rewarding individual performance?
112) Elaborate on how gainsharing can be successful as a form of group incentive.
113) Explain how employee stock ownership plans (ESOPs) differ from stock options.
114) Define incentive pay and explain how it can motivate employees.
115) What are group bonuses and team awards?
116) What are the implications of designing pay for organizational performance?
117) What is a balanced scorecard? Explain its purpose.
118) How does allowing employees to participate in pay-related decisions affect the incentive
process?
