Question

Show Me the Money

One of the key decisions an employer must make is the level of compensation it pays to its employees. In fact, agency theory focuses on the divergent interests and goals of an organization's stakeholders and the ways that employee compensation can be used to align these interests and goals. In this case, we revisit Werner Marketing Services (WMS), the health care marketing company we met in Chapter 11. Now that WMS has implemented a pay structure that includes various levels of jobs and salary ranges, the owner (Tom Werner), HR manager (Meghan Anderson), and other senior managers need to figure out the compensation plan for the 22 people who now work for WMS.

In this exercise, please read the mini-case and answer the questions that follow.

It has been a hectic three months for WMS and its owner, Tom Werner. Werner started WMS—a firm that specializes in working with health care systems and physician groups—a little more than a year ago. As a result of signing a lucrative marketing agreement with the local outpatient clinic, Werner and his then 3-person staff had to expand quite rapidly to 22 people, adding an HR manager, a senior manager of regulatory affairs, a senior manager of health care reimbursement, two project managers, two sales managers, and, most recently, a VP of operations. Now that the company has hired staff and put a pay structure in place for key and non-key positions, the HR manager, Meghan Anderson, and other senior staff are ready to meet with Werner to decide how to design an overall compensation plan for the firm. Everyone has a different take on how best to proceed, and, of course, the owner is right in the thick of the discussion because he wants people to take risks and be motivated by incentives and outcomes, while managers seem to be aligning themselves with behavior-based agency theory.

35.

Which of the following statements is true when it comes to shareholders and managers?

Shareholders are close to daily operations.

Managers like to take risks.

Shareholders are risk averse.

Their goals are usually not the same.

36.

Typically, managers like ________, while shareholders like ______.

risk; stability

salaries; benefits

wealth; perks

stability; risk

37.

Tom Werner wants to provide his employees with a compensation plan that is foremost ____________.

full of benefits

outcome-oriented

on a sliding pay scale

behavior-based

38.

Which of the following compensation programs would likely NOT be acceptable to the WMS managers?

Gainsharing

Profit sharing

Incentive pay

Skill based

Equity shares

Answer 1

answer-

35- Their goals are usually not the same. because shareholder means owner wants managers to take risk and show good outcomes while managers like to get good compensation based on behavior-based agency theory .

36- salaries; benefits because good salaries or compensation attracts managers while good benefits helps owner's company.

37- outcome-oriented because Tom wants people to take risks and be motivated by incentives and outcomes,

38- Skill based because it depends on compensation based on skills and traits so one manager with good skills would get good compensation which would differ from others having less skills.