Question : 41.Which of the following true of how managers may differ : 1243112

 

 

41.Which of the following is true of how managers may differ from shareholders?   

A.Managers can diversify the risks more easily.

 

B.Managers are more likely to pursue projects with high potential payoffs.

 

C.Managers diversify investments more easily.

 

D.Managers are less averse to risk.

 

E.Managers are likely to prefer more emphasis on uncertain incentives than base pay.

 

 

42.Which of the following must a principal do to reduce agency costs?   

A.Encourage the agent to maximize his/her benefits.

 

B.Provide complete autonomy to the agent.

 

C.Discourage the agent from pursuing projects with high potential payoffs.

 

D.Increase information asymmetry and goal congruence.

 

E.Align the agent’s interests with the principal’s interests.

 

 

43.Which of the following is an example of a behavior-oriented contract?   

A.Stock option

 

B.Profit sharing

 

C.Commission

 

D.Merit pay

 

E.Revenue sharing

 

 

44.Which of the following is true about outcome-oriented contracts?   

A.They require more supervision than behavior-oriented contracts.

 

B.When profits drop, agent’s compensation goes up in outcome-oriented contracts.

 

C.Agents do not demand compensating wage differentials in such contracts.

 

D.Agents face minimal risks in such contracts.

 

E.They are typically a major component of executive compensation.

 

 

45.Which of the following statements about outcome-oriented or behavior-oriented contracts is true?   

A.Merit-pay is an example of an outcome-based contract.

 

B.Behavior-oriented contracts do not transfer risk to the agent.

 

C.Outcome-oriented contracts do not require a compensating wage differential.

 

D.Outcome-oriented contracts decrease the agent’s risks.

 

E.In behavior-based contracts, information asymmetry is not an important issue.

 

 

46.Agents prefer a behavior-based contract when _____.   

A.they are inclined to take more risks

 

B.job outcomes are more measurable

 

C.they desire higher compensation

 

D.outcome uncertainty is high

 

E.jobs become less programmable

 

 

47.As jobs become less programmable:   

A.outcome-oriented contracts become less likely.

 

B.monitoring becomes less difficult.

 

C.behavior-oriented contracts become less likely.

 

D.the agent’s risk decreases.

 

E.the requirement for compensating wage deferential increases.

 

 

48.Which of the following makes outcome-oriented contracts less likely to occur?   

A.Risk aversion among agents

 

B.High outcome uncertainty

 

C.More programmable jobs

 

D.Less measurability of outcomes

 

E.Low risk premium in compensations

 

 

49.Agency theory is of particular value in compensation management because of its emphasis on the _____ trade-off.   

A.performance-reward

 

B.risk-reward

 

C.motivation-reward

 

D.ability-reward

 

E.behavior-reward

 

 

50.______ refer to decisions about whether to join or remain with an organization.   

A.Membership behaviors

 

B.Organizational behaviors

 

C.Group dynamics

 

D.Organizational structure

 

E.Organizational norms