When Managers' Compensation Plans Are Tied in a Meaningful Manner

question 45

Multiple Choice

When managers' compensation plans are tied in a meaningful manner to the profits of the firm, agency problems:

• A) can be reduced.
• B) will be created.
• C) are shifted to other stakeholders.
• D)are eliminated entirely from the firm.

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Definitions:

Skill-Based Pay

A compensation system where pay levels are determined by an employee's skills or knowledge, not just job title or position.

Intrinsic Motivation

A form of motivation driven by an interest or enjoyment in the task itself, rather than external factors.

Determined

Having a firm decision or a strong will to achieve a particular goal, often characterized by persistence and perseverance.

Competence

The ability of an individual to do a job properly, encompassing knowledge, skills, and experience.