Asked by Zheng Shouyi on Jul 15, 2024
Verified
Linking incentives to the organization's profits or stock price exposes employees to a high degree of risk.
Organizations' Profits
The financial gain that an organization achieves after deducting the expenses, costs, and taxes necessary to sustain its operations.
Stock Price
The cost of purchasing a share of a company, which fluctuates based on market conditions, company performance, and investor perceptions.
- Acknowledge the potential ethical issues and risks associated with incentive pay, especially for executives.
Verified Answer
EO
Ester OrasmaJul 16, 2024
Final Answer :
True
Explanation :
Linking incentives to the organization's profits or stock price exposes employees to the volatility of the market which can result in high risk. Changes in market conditions, economic events, or internal factors can result in a decrease in profits and a decrease in the value of the company's stock, leading to lower incentives or even none at all. This is a common concern among employees, as their financial stability is tied to the organization's financial performance.
Learning Objectives
- Acknowledge the potential ethical issues and risks associated with incentive pay, especially for executives.
Related questions
Incentive Pay for Executives Lays the Groundwork for Significant Ethical ...
Because Incentive Contracts Result in More Risk Placed on the ...
Incentive Contracts Typically Result in Higher Risk-Related Compensation to Agents ...
A Consequence of an Incentive Contract for Employees Is That ...
Large Pay Increases Are Believed to Be One of the ...