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425 Compensation Management > Chapter 1 > Flashcards

Chapter 1 Flashcards

1
Q

wall street financial service firms and banks used ______ plans that rewarded people for developing innovative financial investment vehicles

A

incentive

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2
Q

Federal Reserve officials advise firms to track warning signs of ______

A

excessive risk taking and cultural breakdowns

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3
Q

the incentive system encourages traders to be ______

A

confident and aggressive

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4
Q

what is the Troubled Asset Relief Program?

A

includes restrictions on executive pay that were designed to discourage executives from taking unnecessary and excessive risks

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5
Q

what are two causes of the global financial crisis?

A

misaligned incentives, weak education in compensation systems

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6
Q

benefits given as part of a total compensation package may also be seen as a reflection of ____

A

equity or justice in society

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7
Q

civilian employers spend about 46 cents for benefits on top of every dollar paid for _____

A

wages and salaries

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8
Q

individuals and businesses spend about __% of US economic output on health care

A

18

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9
Q

when unemployment rates increase, health care coverages (decline/incline)?

A

decline

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10
Q

job loss/gain is a function of ___

A

relative labor costs and productivity

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11
Q

why are some companies moving work out of China?

A

hourly wage is not as low in other countries such as Vietnam, India, and the Philippines

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12
Q

stockholders have a particular interest in what type of pay?

A

executive pay

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13
Q

how are the interests of executives aligned with shareholders?

A

they pay executives on the basis of company performance measures such as shareholder return

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14
Q

how do shareholders influence executive compensation decisions

A

shareholder proposals and election of directors in proxy votes

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15
Q

what are clawback provisions

A

designed to allow companies to reclaim compensation from executives in certain situations

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16
Q

what are the two ways compensation influences the success of managers?

A
  1. it is a major expense that must be managed

2. it is a major determinant of employee attitudes and behaviors

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17
Q

How do companies like Costco manages to hold an advantage over competitors even with higher labor costs?

A

employee retention, customer satisfaction, efficiency in generating sales

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18
Q

why is pay important?

A

it can influence employee behavior, quality of work, and attitude

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19
Q

how do employees view compensation?

A

return in an exchange between their employer and themselves, an entitlement for being an employee of the company, an incentive to stay in a job, and as a reward

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20
Q

the extensive legal framework governing pay consists of what

A

minimum wage, living wage, overtime, nondiscrimination regulations

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21
Q

what are the two ways pay influences employee motivation and behavior?

A

affects motivational intensity, direction, and persistence.
employee ability and organizational design.

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22
Q

what is the incentive effect

A

the ways in which pay influences motivation and behavior

23
Q

what is the sorting effect

A

different types of pay strategies cause different types of people to apply and stay with an organization

24
Q

what does compensation mean in the US

A

something that counterbalances, offsets, or makes up for something else

25
Q

what does compensation mean in China

A

how you are being treated, wages, benefits, training

26
Q

what does compensation mean in Japan

A

taking care of something, giving something

27
Q

what is the definition of compensation

A

fall forms of financial returns and tangible services and benefits employees receive as part of an employment relationship

28
Q

total returns are categorized as

A

total compensation and relational returns

29
Q

what are relational returns

A

learning opportunities, status, challenging work

30
Q

what is total compensation

A

base, merit, incentives, cost of living adjustments

31
Q

what is base wage

A

the cash compensation that an employer pays for the work performed

32
Q

what is salary

A

pay for employees who are exempt from regulations of the Fair Labor Standards Act

33
Q

what are the criteria for cost of living adjustments

A

done on the basis of changes in what other employers are paying for the same work

34
Q

merit increases

A

given as increments to base pay and are based on performance

35
Q

merit bonus

A

based on performance rating and paid in lump sum

36
Q

incentives

A

tie pay increases to performance

37
Q

difference between incentive and merit

A

incentives are tied to objective performance measures in a formula based way, merit increase program typically relies on subjective performance rating

38
Q

what can incentives be tied to

A

performance of an individual employee, a team of employees, a total business unit

39
Q

variable pay

A

another term for incentive

40
Q

long term incentive

A

focus employee efforts on multiyear results, in the form of stock ownership

41
Q

programs that help employees better integrate their work and life responsibilities

A

time away from work, access to services to meet specific needs, flexible work arrangements

42
Q

present value perspective

A

shifts the comparison of today’s initial offers to consideration of future bonuses, merit increases, and promotions

43
Q

what are the objectives pay systems aim to achieve

A

efficiency, fairness, ethics, and compliance with laws and regulations

44
Q

efficiency

A

improving performance, increasing quality, delighting customers and stockholders, and controlling labor costs

45
Q

fairness (equity)

A

fundamental objective of pay systems

46
Q

fairness objective

A

fair treatment for all employees by recognizing both employee contributions for combining the objectives of efficiency and fair treatment of employees as well as compliance

47
Q

if an objective is to increase customer satisfaction, then…

A

incentive programs and merit pay might be used to pay for performance

48
Q

four policy choices

A

internal alignment, external competitiveness, employee contributions, management of pay system

49
Q

internal alignment

A

comparisons among jobs or skill levels inside a single organization

50
Q

total cash compensation

A

wages plus bonuses

51
Q

pay relationships within the organization affect what 3 things

A

employee decisions, flexibility, greater responsibility

52
Q

external competitiveness

A

pay comparisons with competitors

53
Q

employee contributions

A

nature of pay mix

54
Q

managing compensation

A

answers the “so what” questions

425 Compensation Management (2 decks)

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