Watson Water Heaters (WWH) opened for business 30 years ago with fewer than 10 employees and sales in the first year of business of just $500,000. Today, the company has more than 1,000 employees and annual revenues of $450 million. The company’s growth has caused management to begin considering how best to compensate employees. Historically, WWH has used a strictly cash-based compensation system. The company’s chief executive officer, Will Harrell, and chief financial officer, Claire Greer, now believe that such a system is no longer feasible, primarily because they worry that it does not adequately motivate employees to think of the company’s long-term interests. Will and Claire recently met with a compensation consultant to discuss new ways of compensating employees that may better link compensation and performance.

Required
A. Excluding cash compensation, what are the possible types of compensation that WWH may use?
B. What are the advantages and disadvantages of each type of compensation identified by you in question A?