After three years of lackluster performance, Super Mega Corp., a Fortune 100 conglomerate, is hiring a new CEO. Mary Cohn, who took over as board chair from the previous CEO, is leading the process and preparing to make an offer to the top candidate. Before doing so, she wants to carefully examine the different types of pay-for-performance plans she can offer the candidate. The compensation plan for the new CEO must ensure that Super Mega Corp. is managed in the long-term interest of shareholders. Additionally, pension fund Atlas, which owns 53% of Super Mega Corp., has been very unhappy with the executive team's pay, and its management team wants Mary to ensure the CEO's pay is settled using incentives to carefully drive results. She will probably use a balanced scorecard to establish payment.

Using your knowledge of executive performance pay methods and the situation at Super Mega Corp., answer the following question.

1- Mary's function in this case is to represent __________.

a. management

b. government

c. shareholders

d. employees

e. customers

2- One of the main problems with executive pay in the United States that Super Mega Corp. should avoid is having compensation that is _______.

a. strictly limited by market forces

b. subject to high marginal tax brackets

c. direct payment of more than $1 million before taxes

d. subject to industry or Securities and Exchange Commission (SEC) limits

e. always high, regardless of performance

3- One of the main reasons for putting significant executive compensation in the form of incentive pay "at risk" is _________

a. comply with SEC requirements

b. improve employee fairness perceptions

c. include short and long term performance objectives

d. avoid shareholder revolts

e. affirm the independence of the board

4- The balanced scorecard approach design could combine measures to deliver value to everyone except _______.

a. shareholders

b. regulators

c. employees

d. customers

e. foreign owners

5- Maria wants to use a balanced scorecard to establish payment because _________.

a. is required by the Omnibus Budget Reconciliation Act of 1993.

b. will keep the company out of the press.

c. pension administrators insist.

d. combines measures to reward the achievement on a variety of goals.

e. helps reduce salary.