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Unformatted text preview: greement over the percentages of shared of profits and the forms of distribution (cash or deferred) of profits between company and employees Annual variations and possibility of no payout due to financial condition of company Maintaining motivational connection of profit­sharing to performance of employees Enterprise Incentive Plans Enterprise Incentive Plans (cont’d) Stock Options Granting employees the right to purchase a specific number of shares of the company’s stock at a guaranteed price (the option price) during a designated time period. The value of an option is subject to stock market conditions at the time that option is exercised. Enterprise Incentive Plans Enterprise Incentive Plans (cont’d) Employee Stock Ownership Plans (ESOPs) Stock plans in which an organization contributes shares of its stock to an established trust for the purpose of stock purchases by its employees. The employer establishes an ESOP trust that qualifies as a tax­exempt employee trust under Section 401(a) of the Internal Revenue Code Stock bonus plans are funded by direct employer contributions of its stock or cash to purchase its stock. Leveraged plans are funded by employer borrowing to purchase its stock for the ESOP. Employee Stock Ownership Plans Employee Stock Ownership Plans Rewarrds and Riisks off ESOPS Rewa ds and R sks o ESOPS Advantages Advantages Disadvantages Disadvantages Retirement benefits Retirement benefits Liquidity and value Liquidity and value Pride of ownership Pride of ownership Single funding basis Single funding basis Deferred taxes Deferred taxes Not insured Not insured Summary and Conclusions Pay­for­performance: many challenges Meeting the challenges requires planning Pay­for­performance at four levels: Individual, group, plant, organization wide If P­f­P plan becomes entrenched Should be part of larger compensation system Should fit with overall strategic plan of org. Employees will expect them regularly P­f­P for executives and salespeople requires additional thought...
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