QUESTION 2 A CEO spent all his time thinking about profits. "Sell, sell, sell" was his motto. The company had great financial results his first year, and he didn't notice the red flags in the other areas of the balanced Scorecard. He was completely caught off guard when profits fell the second year. His big problem was that he wasn't paying attention to Leading indicators Information overload Lagging indicators Targets QUESTION 3 2 points Wayne, Co. is an investment fund that manages billions of dollars of investments. R. Wayne, the founder, paid his employees some incentive compensation but also some amount of guaranteed base pay. His son, T. Wayne took over the fund last year and made a dramatic change in employee compensation. He started hiring employees with no flat pay but the promise that they would be paid 10% of all earnings but that they had to reimburse the firm for 10% of all losses. After the change, many employees left. Many of the new employees were habitual gamblers. This is an example of the effect of incentive compensation. Communication Screening Risk-sharing Motivation QUESTION 6 The combination of high base salary and low incentive intensity increases workers' moral hazard True False QUESTION 7 Higher incentive intensity increases motivation, but at the cost of a higher compensating differential, True False