The incentive-based compensation plan for managers seems conceptually flawed.

This paper concentrates on the primary theme of The incentive-based compensation plan for managers seems conceptually flawed. in which you have to explain and evaluate its intricate aspects in detail. In addition to this, this paper has been reviewed and purchased by most of the students hence; it has been rated 4.8 points on the scale of 5 points. Besides, the price of this paper starts from £ 79. For more details and full access to the paper, please refer to the site.

Risk and cost

Could you please check the anwser below if it is correct, if not please help me fix the errors for number 12.

12. a.
The incentive-based compensation plan for managers seems conceptually flawed. The growth rates, risks, industry practices and market conditions in the industry that each division faces is different. The value of each division to NFP is because it offers different risk and return combinations to the corporation as a whole. Tying compensation to factors outside a manager`s control such as the maturity of the timber or wood products industries is not a valid incentive structure. Sales and earnings growth would likely be fastest in Plastics and Real Estate. ROE should be steadier but lower in Wood Products. ROE would align the managers` interests closest to stockholder interests but would differ across industries by factors outside the managers` control.

12. b. The managers would all dislike the compensation plan. It depends too much on factors outside their control, and fluctuates too widely from year to year.

These reactions would be bad for maximizing the price of NFP stock since some managers may not strive to achieve results in years where they expect no incentive bonuses due to poor industry conditions.

12 c.
NFP has other options to reduce the impact of differences in division results on incentive-based compensation. One way is to measure manager performance against other companies in the same industry. ROE compared to ROE outcomes in the industry is fairer and isolates each division`s results instead of making unequal comparisons across different industries. Other management efficiencies can also be measured against industry averages such as asset turnover, etc.

100% Plagiarism Free & Custom Written,
Tailored to your instructions

International House, 12 Constance Street, London, United Kingdom,
E16 2DQ

UK Registered Company # 11483120

100% Pass Guarantee

Order Now


We've produced some samples of what you can expect from our Academic Writing Service - these are created by our writers to show you the kind of high-quality work you'll receive. Take a look for yourself!

View Our Samples

FLAT 25% OFF ON EVERY ORDER.Use "FLAT25" as your promo code during checkout