10.1 Both CEOs and VPs tend to have a certain percentage of their compensation tied to the company overall performance. Who (VPs or the CEO) should have a larger percentage of wages tied to the company performance? Explain.

10.2 CEOs often receive a substantial part of their compensation as variable pay. It is difficult to measure CEO's performance. You are a compensation consultant hired by the board of directors of a midsize company. To which of the following accounting measures will you propose to tie executive compensation:

a. Change in earnings reported by the company.

b. Price earning ratio.

c. Change in revenues.

d. Change in the market value of the company.

10.3 Suppose that you use all of your savings to buy a struggling company, and now must turn it around. Should changing employee incentives be one of the first tools that you use to manage change? If so, why? If not, why not? If you do use incentives to drive organizational change, what else is likely important for you to change?

10.4 How might you try to detect if your employee is gaming the incentive system? Try to think of concrete examples.

10.5 Consider important medical care decisions. Should such decisions be made by the doctor or the patient? What factors are important? Given your answer, how would you think about structuring incentives in order to balance quality of care against cost?