=+20-26 KK Risk sharing, incentives, benchmarking, multiple tasks OBJECTIVE 8 The Solar Division of Energell sells solar panels. Energell’s corporate management gives the Division Manager, Pat McCue, considerable operating and investment autonomy in running the Solar Division. Energell is considering how it should compensate Pat McCue. Proposal 1 calls for paying Pat a fixed salary. Proposal 2 calls for paying Pat no salary and compensating her only on the basis of the division’s ROI, with calculations based on operating profit before any bonus payments. Proposal 3 calls for paying Pat some salary and some bonus based on ROI. Assume that Pat McCue does not like bearing risk.

Required 1 Evaluate the three proposals, specifying the advantages and disadvantages of each.