Exam (elaborations)
Variable Pay Plans- Questions and Answers
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Variable Pay Plans- Questions and Answers
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Variable Pay Plans- Questions and AnswersEquity-Based Plan Approaches Correct Ans-Different approaches to equity-based plans,
including appreciation only (stock options and stock appreciation rights) and total value (stock
grant, restricted stock, and performance shares).
Example - Stock Options Correct Ans-An example of a stock option plan where an employee
receives the option to purchase shares at a grant price and can exercise the option after a certain
period of time.
Retention Correct Ans-Equity plans as a variable pay form.
Stock Performance vs. Employee Performance Correct Ans-Discrepancy where stock price
may not reflect employee performance.
Communication Challenge Correct Ans-Difficulty in conveying equity-based plans to
employees.
Shareholder Approval Correct Ans-Requirement for many equity-based plans.
Limited Eligibility Correct Ans-Restriction of equity plans to top organization employees.
Nonequity-Based Plans Correct Ans-Plans not tied to stock performance.
, Cash Payouts Correct Ans-Awards typically granted in cash in nonequity-based plans.
Reward Long-Term Performance Correct Ans-Objective to reward long-term organizational
performance.
Specific Goals and Objectives Correct Ans-Focus on achieving specific organizational goals.
Conserve Stock Correct Ans-Organizations avoiding using stock in incentive plans.
Performance Unit Plan (PUP) Correct Ans-Plan granting fixed units with value based on goal
achievement.
Book Value Plan Correct Ans-Awards based on organization's book value increase.
Multi-Year Performance Plan Correct Ans-Cash payouts earned and paid over multiple years.
Promote Long-Term Perspective Correct Ans-Encouraging long-term thinking and reducing
short-term focus.
Tied to Actual Results Correct Ans-Incentives linked to real outcomes rather than stock price.
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