Measuring and managing financial performance – The Batteries division of Dexter Cars sells car… 1 answer below »
Measuring and managing financial performance – The Batteries division of Dexter Cars sells car… 1 answer below » | savvyessaywriters.org
Case study 1
Measuring and managing financial performance
The Batteries division of Dexter Cars sells car batteries. Dexter is considering how it
should compensate Jeremy Clark, the general manager of the Batteries division.
Proposal 1 calls for paying Jeremy Clark a fixed salary.
Proposal 2 calls for paying Jeremy Clark no salary and compensating him only on the
basis of the division’s ROI, calculated based on operating income before any bonus
payment.
Proposal 3 calls for paying Jeremy Clark some salary and some bonus based on ROI.
Assume that Jeremy Clark does not like bearing risk.
Required:
Evaluate the three proposals, specifying advantages and disadvantages of each, and
consider which proposal would be the most suitable for Jeremy Clark and which for the
company.
In your discussions, you should consider the following issues:
• Agency theory and goal congruence;
• Motivation theories and exerting extra effort;
• The advantages and disadvantages of ROI; and
• Risk and return trade-offs for Jeremy who does not like bearing risk.
Attachments:
ACC20014-Case….pdf
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