Which of the Following Is NOT a Sound Guideline for Designing

question 30

Multiple Choice

Which of the following is NOT a sound guideline for designing a reward and incentive system that helps promote good strategy execution?

• A) The reward system must be administered with scrupulous objectivity and fairness.
• B) The payoff for meeting or beating performance targets must be a major, not minor, piece of the total compensation package.
• C) The incentive plan should extend to all managers and all employees, not just top management.
• D) The reward system must reward nonperformers who, despite expending tremendous effort, have not fared well in achieving the benchmarks under the incentive system.
• E) Make sure that the performance targets each individual or team is expected to achieve involve outcomes that the individual or team can personally affect.

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Definitions:

Shareholders' Equity

The residual interest in the assets of a company after deducting liabilities, represented by the capital contributed by shareholders and retained earnings.

Entity Approach

A method in merger and acquisition accounting where the acquiring and target companies are treated as combining their interests, forming a new reporting entity.

Retained Earnings

Profits that a company has earned to date, less any dividends or other distributions paid to shareholders.

IFRS

International Financial Reporting Standards, a set of accounting guidelines that dictate how financial statements should be reported around the world.