Question: 1 Commission salespeople are paid their commission after they write

1. Commission salespeople are paid their commission after they write successful insurance policies or consummate the sale of financial products. Should their commissions be recovered if the company subsequently suffers a loss as a result of the business written by the sales staff? Should there be an upper limit placed on commissions, so that no one employee receives $280 million in commissions over an eight-year period? How could such an upper limit be selected if a company wished to establish one?
2. Is it right that perks such as holidays at luxury resorts are only provided to senior executives and the sales staff but not to the other employees of the firm?
3. Should senior officers who have extensive firm-specific knowledge be hired back as consultants to help rectify their mistakes?

The advantage of commission sales is that if the salesperson puts in effort and makes a sale, then both the company and the sales-person benefit. The salesperson receives a commission and the company receives the proceeds of the sale, net of the commission. Referred to as a first-best contract, it supposedly aligns the interests of both the company and its salesforce. In addition, companies often reward their leading sales- people with expensive trips and holidays.

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  • CreatedOctober 28, 2014
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