What is the difference between stock options and an employee stock ownership plan ESOP quizlet?

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B.

Which of the following is a reason for ESOPs' popularity?

A. Earnings of the trust holdings are exempt from income taxes.
B. ESOPs provide very high risk-free retirement income.
C. Employees can use ESOPs to buy their company during financial crises.
D. ESOPs require companies to invest 51 percent in the company's own stocks.
E. The employees are provided with many more stocks than they actually own.

D.

When designing incentives, managers should make sure that:

A. all the employees are paid equal amounts.
B. even the lowest performing employees get some rewards.
C. employees focus only completing the task quickly.
D. employees think that the pay plan is fair.
E. they focus on hiring employees for whom earning money is the only reason to do a good job.

E.

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 of the following should be used by this organization?

A. Profit sharing plan
B. Piecework rates
C. Merit pay system
D. Scanlon plan
E. Balanced scorecard

A.

A company provides wages to its employees based on the amount workers produce. The more employees produce, the more they earn. This type of plan is called:

A. piecework rate plan.
B. merit pay plan.
C. Scanlon plan.
D. profit sharing plan.
E. standard hour plan.

E.

Which of the following is a disadvantage of a merit pay system?

A. It does not relate the rewards to economic conditions.
B. It cannot be used effectively in performance appraisals.
C. Comparative pay is not considered in its evaluation.
D. It is not consistent with performance management's dimensions.
E. It can quickly become expensive for the company.

D.

Straight commission plans:

A. imply that the employees receive a straight salary.
B. are useful when the organization wants salespeople to concentrate on listening to customers.
C. help to attract employees risk-averse employees.
D. are common among insurance and real estate agents.
E. are not common among car salespeople.

A.

What is 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. An incentive pay in which payments are a percentage of the organization's profits and do not become part of the employees' base salary
E. It is a system designed to measure the performance of HR personnel based on the quality of recruitment

E.

Retention bonuses refer to:

A. the special reward programs used to satisfy the lower and middle level managers.
B. the bonuses provided to union members to withhold a strike decision.
C. the bonuses provided to employees who take long leaves without pay.
D. annual incentives paid to daily wage workers to remain in the organization.
E. one-time incentives paid in exchange for remaining with the company.

C.

An incentive system in which an organization links pay increases to ratings on performance appraisals is referred to as:

A. commission.
B. a Scanlon plan.
C. merit pay.
D. gain sharing.
E. profit sharing.

A

An advantage of merit pay is that:

A. it makes the reward more valuable by relating it to economic conditions.
B. it promotes group performance instead of promoting individual behavior.
C. it provides merit increases to employees only on the basis of performance.
D. it would never become costly for the employers.
E. it results in a bigger short-term reward for the best performers.

A.

Which of the following is a short-term incentive?

A. Return on investment
B. Base salary
C. Stock options
D. Stock purchase plans
E. Company shares

A.

What is the drawback of stock ownership as a form of incentive pay?

A. Financial benefits mostly come when the employee leaves the organization.
B. Employees have the right to participate in votes by shareholders, hence reducing the negotiating power of the employer.
C. It causes the employers to lose control over their employees.
D. The employees will not benefit even if the organization is performing well.
E. Stock options do not provide any ownership to employees, instead it offers an equivalent sum.

D.

Which of the following is a 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

A.

How does linking executive pay to stock performance lead to unethical behavior?

A. Executives can use the advantage of knowing the company's inside information to buy or sell stock and create huge personal gains.
B. Executives can roll in the stock price into their base pay to avoid paying a huge tax.
C. Executives do not inflate the stock price in order to enjoy bonuses.
D. Executives can use the employee stock ownership plan to buy their company if it is experiencing financial problems.
E. The executives can obtain as many shares as they need at a price that is much lower than the market rate.

A.

The decisions about merit pay are based on two factors: the individual's performance rating and the individual's:

A. compa-ratio.
B. seniority.
C. pay grade.
D. longevity.
E. emotional quotient.

B

In order to control compensation costs, administrators of merit pay programs must closely monitor the compa-ratio and the:

A. number of pay grades in the pay structure.
B. an individual's performance ratings.
C. number of new hires in the company.
D. company's stock price in the financial year.
E. average pay of the area where the organization is functioning.

E.

What is the difference between bonuses and team awards?

A. Bonuses are for bigger work groups whereas team awards are for small teams.
B. Bonuses reward individual performance whereas team awards encourage cooperation.
C. Bonuses are usually given to employees who meet deadlines whereas team awards are given only when the team as a whole meets the targets.
D. Bonuses encourages competition among individuals whereas team awards only foster cooperation.
E. Bonuses reward attainment of goals measured in terms of physical output whereas team awards reward performance in terms of cost savings.

E.

Which of the following is an advantage of using balanced scorecard?

A. It eliminates the need to communicate the details of the plan to the employees.
B. It eliminates managerial effort when providing incentives to employees.
C. It provides more pay to all employees in the organization.
D. It reduces employee stress as it does not focus on financial targets.
E. It helps employees understand the organization's goals.

A

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.

C

Pay specifically designed to energize, direct, or control employees' behavior is known as:

A. monthly salary.
B. wage.
C. incentive pay.
D. annual salary.
E. fixed pay.

C.

Team awards differ from group bonuses in that they:

A. are typically plant-wide group incentive programs.
B. make payments in company stock rather than in cash.
C. are more likely to use a broad range of performance measures.
D. encourage competition among individual employees to achieve higher bonus.
E. give more importance to organizational performance than small groups' performance.

A.

Paying most or all of a salesperson's compensation in the form of commissions encourages the salesperson to focus on:

A. closing the sale.
B. developing customer goodwill.
C. working as a team member.
D. building a relationship with the customer.
E. improving the quality of customer experience.

C

Differential piece rates system refers to:

A. an incentive pay plan in which the employer pays the rate per piece based on the difference in performance of employees.
B. a wage system designed for salespeople who earn a differential pay for every piece sold.
C. an incentive pay in which the piece rate is higher when a greater amount is produced.
D. a system of linking pay increases to ratings on performance appraisals.
E. an incentive pay plan where every employee is paid different wages based on the skills they possess.

C

Which of the following is true of a balanced scorecard?

A. It encourages employees to compete at the expense of cooperating to achieve organizational goals.
B. It allows employees to buy their company when it is experiencing financial problems.
C. It combines the advantages of different incentive pay plans and helps employees understand the organization's goals.
D. It increases cooperation but does little to motivate day-to-day effort or to attract and retain top individual performers.
E. It is the only measure used by top management to measure the performance of HR professionals and managers.

A.

When an employee's pay is calculated as a percentage of sales, it is referred to as:

A. commission.
B. gain sharing.
C. merit plan.
D. variable wage plan.
E. profit sharing.

E.

Which of the following incentive programs measures improvements in productivity and effectiveness and distributes a portion of each profit to employees?

A. Merit pay
B. Team award
C. Commission
D. Profit sharing
E. Gainsharing

D.

Which of the following is true about a piece rate plan?

A. It can be used for all types of jobs and in all types of industries.
B. It is best suited for complex jobs and tasks.
C. It can be used to encourage team work and collaboration.
D. It has a direct link between the work and how much the employee earns.
E. It encourages peers to perform as well as the co-workers and reduce conflicts.

B.

Which of the following types of incentive pay plans are used to reward individual performance?

A. Gainsharing
B. Merit pay
C. Scanlon plan
D. Profit sharing
E. Stock ownership

A.

Organizations that want employees to focus on efficiency and on group incentives are most likely to implement a _____ program.

A. gainsharing
B. standard hour
C. bonus
D. commission
E. piece rate pay

C.

By law, what is the minimum percentage of assets that an ESOP must invest in its company's stock?

A. 10
B. 26
C. 51
D. 60
E. 76

A.

Which of the following is an incentive plan that is intended to improve the overall performance of an organization?

A. Profit sharing
B. Gainsharing
C. Merit pay
D. Group bonus
E. Scanlon plan

E.

Which of the following is true about standard hour plans?

A. They always encourage employees to focus on customer service.
B. They succeed only for employees who are not motivated by money.
C. They encourage employees to focus mainly on quality.
D. In terms of their pros and cons, they are very different from piecework plans.
E. They encourage employees to work as fast as they can.

E.

Identify the disadvantage of using profit sharing plans.

A. They cannot be used to improve the organization's performance as a whole.
B. The employees may develop a narrow view of their roles in the organization.
C. They cost more when the organization experiences financial difficulties.
D. Sharing profit with the employees ultimately reduces the organization's profitability.
E. Profit sharing is not directly linked to individual behavior.

B.

Which of the following is true of a performance bonus?

A. It is designed to reward group performance.
B. It should be re-earned by employees during each performance period.
C. It is rolled into base pay and provided yearly or monthly.
D. It lacks flexibility and hence it is less popular.
E. It is not a one time reward in most of the cases.

C

A. It has been established that profit sharing helps organizations perform better.
B. It makes employees feel that they have control over the company's profits.
C. It costs less when the organization is experiencing financial difficulties.
D. It helps employees find a direct relation between their performance and gain.
E. It motivates employees more than individual incentives.

D.

Which of the following is a disadvantage of using group bonuses?

A. Physical outputs are not rewarded.
B. It reduces the level of cooperation between the members of the group.
C. The performance measures used are narrow.
D. It could result in competition among groups.
E. It cannot be used to promote specific goals.

C

An organization uses a gainsharing program in which employees receive a bonus if the ratio of labor costs to the sales value of production is below a set standard. This incentive plan is referred to as:

A. group bonus.
B. merit pay plan.
C. Scanlon plan.
D. piecework rate.
E. team award.

E.

Piecework rate plans are most suited for _____.

A. innovative tasks
B. non-standard jobs
C. managerial jobs
D. jobs with difficult-to-measure output
E. routine, standardized jobs

D.

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. The Securities and Exchange Commission
E. Omnibus Budget Reconciliation Act

B.

What is profit sharing?

A. A gainsharing program in which employees receive a bonus if the ratio of labor costs to the sales value of production is below a set standard.
B. An incentive pay in which payments are a percentage of the organization's profits and do not become part of the employees' base salary.
C. A group incentive program that measures improvements in productivity and effectiveness and distributes a portion of profit to employees.
D. A combination of performance measures directed toward the company's profit and used as the basis for awarding incentive pay.
E. An incentive plan where a percentage of the previous year's profits is provided to employees as a part of salary.

E.

An effective incentive pay plan should:

A. have performance measures based on employees' requirements.
B. not be provided as a direct percentage of employees' performance.
C. encourage group performance and dispirit individual achievements.
D. be the same for all types of employees in the organization.
E. have performance measures linked to the organization's goals.

C.

_____ provides a method for rewarding performance in all of the dimensions measured in the organization's performance management system.

A. Differential piece rate
B. Standard hour plan
C. Merit pay
D. Piece rate
E. Commission

E.

Which of the following incentive plans would enable its employees to think like owners, taking a broad view of what they need to do in order to make the organization more effective?

A. Merit pay
B. Gain sharing
C. Scanlon plan
D. Performance bonuses
E. Profit sharing

A.

What is the function of a merit increase grid?

A. To make the merit increases consistent
B. To further increase the pay for those whose pay is relatively higher for their job
C. To increase the employees' compa-ratio
D. To stabilize economic conditions
E. To increase incentives on an year-by-year basis

C.

In 2003, a company employee received an option to purchase the company's stock at $45 per share. If the stock is trading at $40 a share in 2005, the employee will most likely:

A. exercise the option, receiving a gain of $5.
B. exercise the option, receiving a gain of $40.
C. would not bother to exercise the options.
D. be eligible to obtain a price $45 per share.
E. sell the shares to a third party slightly above the market price.

B

What is the difference between stock options and employee stock ownership plan (ESOP)?

A. Stock options carry significant risk whereas ESOPs are risk-free.
B. Stock options are usually used with top management 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.

B.

In merit pay programs, an individual's compa-ratio represents his/her:

A. pay relative to performance of other workers in the industry.
B. pay relative to average pay.
C. comparable worth versus others.
D. ratio of pay to benefits.
E. the average worth of the skills possessed by the individual.

E.

If employee participation in making pay-related decisions is encouraged in an organization, then:

A. administering the plans become 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.

B.

The Scanlon plan is a variation of:

A. profit sharing plans.
B. gainsharing plans.
C. merit pay plans.
D. individual bonus plans.
E. commission plans.

B.

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. Rewarding the achievement of a variety of goals reduces temptation on the executive's part to gain bonuses by manipulating data.
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 company's long-term success because funds in ESOP are guaranteed by the Pension Benefit Guarantee Corporation.
E. In a balance scorecard, maximum points are given to ethical behavior.

B.

_____ refers to an incentive pay in which the wage paid is higher when a greater amount is produced.

A. Profit sharing
B. Differential piece rate
C. Gain sharing
D. Scanlon pay
E. Merit pay

D.

Standard hour plans are likely to succeed if:

A. most or all of a salesperson's compensation is in the form of commissions.
B. employers keep labor costs to a minimum.
C. the pay increase is linked to ratings on performance appraisals.
D. employees want the extra money more than they want to work at a pace that feels comfortable.
E. the organization values employee satisfaction and motivation more than profits.

D

As an incentive to work efficiently, some organizations pay production workers a ____, a wage based on the amount they produce.

A. merit pay
B. commission
C. standard hour pay
D. piecework rate
E. special bonus

C

Stock options have their greatest motivational potential during periods of:

A. high unemployment.
B. downturns in the economy.
C. high economic growth.
D. low inflation.
E. slowdown in the company's growth.

B.

Which of the following is an advantage of group incentives?

A. Group incentives always use a broad range of performance measures.
B. Groups try to outdo one another in satisfying customers and therefore create healthy competition.
C. They encourage employees to achieve their goals irrespective of the cooperation of team members.
D. They reward the performance of all the employees at a facility.
E. They always result in cooperation among team members without any competition.

A.

Which of the following is a disadvantage of using incentive plans?

A. The goals of an incentive plan may interfere with other management goals.
B. The goals of incentive plans cannot be linked to particular outcomes or behaviors.
C. Incentive plans cannot be used to promote group and organizational performance.
D. Incentive plans cause dissatisfaction among the non-performing employees in the organization.
E. Incentive plans are not very effective for jobs other than sales and service.

D.

What is meant by backdating a stock option?

A. Reaping windfall in the stock market by selling stock based on company's nonpublic information
B. Falsifying numbers in the company's annual report to hide losses and inflate the stock prices
C. Buying company's stock just before the date of key product launch
D. Changing the price in the original option agreement so that the option holder can buy stock at a bargain price
D. Re-evaluating a company's stocks to adjust it to a previous date so that the shareholders and employees minimize the losses

C.

A piecework rate plan is best suited for:

A. HR professionals.
B. executives.
C. production workers.
D. managers.
E. knowledge workers.

C.

An organization uses Scanlon plan to provide incentives to employees. The workers produce parts worth $5 million. The target ratio set by the organization is 30%. The employees will be given a bonus if the actual labor costs are less than:

A. $0.5 million.
B. $1 million.
C. $1.5 million.
D. $2 million.
E. $2.5 million.

D.

The link between employees' performance and pay is harder to establish in:

A. piece rate plans.
B. merit pay plans.
C. standard hour plans.
D. stock ownership plans.
E. Scanlon plans.

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