A Manager's Compensation Plan That Offers Financial Incentives for Increases

question 8

Multiple Choice

A manager's compensation plan that offers financial incentives for increases in quarterly profitability may create agency problems in that:

• A) the managers are not motivated by personal gain.
• B) the board of directors may claim the credit.
• C) short-term, not long-term profits become the focus.
• D) investors desire stable profits.

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Definitions:

Unlearned Reaction

An instinctual or reflexive response that occurs without prior learning or experience, typically innate and common in human and animal behavior.

Previous Conditioning

The learning or training that an individual has received in the past, which influences their current behavior or reactions.

Evaluative Conditioning

A process where the qualities of one stimulus become attributed to another through association.

Classical Conditioning

An educational process where two stimuli are consistently paired together, resulting in a response initially triggered by the second stimulus ultimately being triggered by just the first stimulus.