=+20-34 K Executive compensation, balanced scorecard OBJECTIVES 1, 8 Community Bank recently introduced a new bonus plan for its business unit executives. The company believes that current profitability and customer satisfaction levels are equally important to the bank’s long-term success. As a result, the new plan awards a bonus equal to 2% of salary for each 2% increase in net income or 1% increase in the company’s customer satisfaction index. For example, increasing net income from $3 million to $3.3 million (or 10% from its initial value) leads to a bonus of 10% of salary, while increasing the bank’s customer satisfaction index from 70 to 73.5 (or 5% from its initial value) also leads to a bonus of 10% of salary.

There is no bonus penalty when net income or customer satisfaction declines. In 2013 and 2014, Community Bank’s three business units reported the following performance results:

Retail banking Business banking Credit cards 2013 2014 2013 2014 2013 2014 Net income $2 500 000 $3 120 000 $2 200 000 $2 616 000 $2 150 000 $2 122 500 Customer satisfaction 73 74 71 74.6 71 80.35 Required 1 Calculate the bonus as a percentage of salary earned by each business unit executive in 2014.