INDIVIDUAL RESPOND TO INCENTIVE

WHAT IS INCENTIVE ?

• Incentive is something that motivates an individual to perform an action

• Incentive not related to benefits, reward or bonus

• Incentive make people choose less benefits option.

• Incentive can't make people work hard at doing something

What is the purpose of negative incentives?

• To motivate people with rewards

• To make people avoid good behavior

• To punish people for bad behavior

• To increase employee satisfaction

What could happen if managers don’t receive proper incentives?

• They will automatically increase company profit

• They may focus on personal goals instead of company goals

• They will become shareholders

• They will quit their jobs immediately

How can the ‘principal-agent’ problem be reduced?

• By giving managers more annual leave.

• By requiring shareholders to attend the office daily.

• By offering managers share options and performance-related pay.

• By replacing all managers with shareholders.

What is the main problem that arises from the separation of ownership and control in a company?

• Shareholders no longer receive dividends.

• Managers are too busy to make decisions.

• Shareholders are involved in daily operations.

• Managers have less incentive to maximise profits.

There are 4 ways to reduce agency problems between managers and shareholders. True or False?

• TRUE

• FALSE

incentives have no effect on people’s behaviour

• TRUE

• FALSE