Asked by Laurin Fortuin on Sep 24, 2024
Verified
The parent company would want to reward managers based on division revenues because
A) The managers usually have the least information about their divisions
B) It would incentivize the otherwise clueless managers about the daily activities of their divisions
C) The managers usually have the best information about how to run their divisions
D) None of the above
Division Revenues
The income generated from the operations of a specific division within a larger corporation or organization.
Managers
Individuals responsible for planning, organizing, leading, and controlling resources to achieve organizational goals.
Parent Company
A corporation that owns enough voting stock in another firm to control management and operations by influencing or electing its board of directors.
- Analyze the implications of rewarding managers based on division revenues versus division profits.
Verified Answer
AG
Andreea Gheorghe5 days ago
Final Answer :
C
Explanation :
Managers of a division usually have the best information about how to run their divisions as they are responsible for the day-to-day operations and have a better understanding of the market and customers. By rewarding them based on their division's revenues, they are incentivized to make decisions that will increase their division's revenue and ultimately benefit the parent company. Option A and B are incorrect as they imply that the managers have limited knowledge and understanding of their divisions, which is not necessarily true.
Learning Objectives
- Analyze the implications of rewarding managers based on division revenues versus division profits.