Practice question · Multiple choice
Equity and options are said to align employees with long-term firm value in a way a quarterly bonus does not. How does that alignment actually work?
Hints
- Ask WHEN each instrument pays out and on what it depends.
- What does a target-based bonus reward at the end of a quarter?
Show the answer
C. The payoff depends on the firm's value at a future date
Why
Aligning the horizon is the whole design. It also explains the failure mode: options that reward volatility rather than value can encourage exactly the risk-taking they were meant to discipline.
Practise Human Resource Management
The app has 6 more questions on this lesson, and keeps your place in the course. Business I is free to start.
More questions on Human Resource Management
- Order the stages of the HR pipeline for a growing firm.
- A selection funnel’s output is multiplicative, so doubling the pass rate at any single stage roughly doubles…
- Internal or external recruitment? Sort each advantage.
- Central tendency and leniency both compress appraisal scores, yet they are treated as different errors. What…
- Research on selection validity finds that the _most widely used_ hiring tool is among the weakest predictors…
- Unstructured interviews predict job performance poorly and remain the most-used selection tool. What sustains…
- Which raters contribute to a 360-degree feedback process?