PRACTICE EXAM 3
Chapter 13—Variable Pay and Executive Compensation
MULTIPLE CHOICE
1. Susan, the president of the school board for a rural school district, is interested in implementing a pay-forperformance compensation system in the school. The school board has called you in as an expert in
incentive compensation to explore this option. You tell Susan that
a. pay-for-performance is not appropriate for public sector employees.
b. a teacher pay-for-performance system rarely works unless the teachers are involved in the
design of the system.
c. teachers’ unions usually support the idea of pay-for-performance because it increases
teacher pay which is usually low.
d. improvements in student test scores are a non-controversial measure of teacher
performance.
2. The CEO of a major corporation is being interviewed by a reporter from a TV news show. The CEO
makes over $50 million a year, and the reporter asks, “Are you really worth $50 million a year to your
company, especially when most of your employees make minimum wage?” All of the following are
plausible responses to the reporter’s question EXCEPT
a. “I have to make major decisions, and I work endless hours under great pressure.”
b. “I am in charge of the company, and I am responsible for the results.”
c. “Like a professional athlete, the top earning years of corporate executives are very
limited.”
d. “All George Clooney and Brad Pitt have to do is look handsome to make huge acting fees.
I have the responsibility for a major corporation.”
3. Financial measures that can be used to judge executive performance include all of the following EXCEPT
a. earnings per share.
b. net income before taxes.
c. market share.
d. return on equity.
4. What is the usual composition of the compensation committee?
a. a subgroup of the Board of Directors including officers of the firm
b. a subgroup of the Board of Directors who are not officers of the firm
c. executives from other companies who serve on a committee that is separate from the
Board of Directors, but which reports to it
d. compensation consultants without executive management involvement
5. OnionDome Manufacturing has suffered major losses in the last few years. Last year the board of
directors fired the CEO and hired Simon Simple from one of its major competitors. Simple has laid off 20
percent of the hourly employees and 15 percent of the managers and professional staff in the company.
He has sold off two unprofitable subsidiaries, and for the first time in five years the company has posted a
small profit. This year the board of directors has given Simple a multi-million dollar bonus. Which of the
following statements is TRUE?
a. It is unusual for a company that has experienced mass layoffs to give executives large
bonuses.
b. Simple should not receive a performance bonus this year because the profits are due to
manipulation.
c. The Sarbanes-Oxley Act prohibits this type of bonus.
d. The employees at OnionDome may feel that it is unethical for Simple to have received this
bonus.
6. What is the role of a compensation committee of the Board of Directors?
a. To assist the HR unit in developing overall pay and benefit programs for the organization.
b. To develop a compensation package that ties the organization’s overall compensation
system to the organization’s goals and objectives..
c. To make recommendations to the shareholders on the compensation formula for members
of the board of directors.
d. To make recommendations to the Board of Directors on overall pay policies, salaries for
top officers, stock options, and additional perks for executives.
Chapter 14—Managing Employee Benefits
MULTIPLE CHOICE
7. Rapid increases in the costs of health benefits are having all of the following effects EXCEPT
a. causing many employers to drop health benefits for employees.
b. causing many employers to require retirees to pay more for health benefits.
c. causing many employers to establish on-site health clinics in lieu of health insurance.
d. causing many employers to implement prescription drug management plans.
8.
Betty is interviewing for a job with two different firms in the same industry and city. The job description
and salary are identical. In one company the job will be unionized. The other company is non-union.
Betty can expect that
a. the non-union firm will have more generous benefits.
b. the unionized firm will have more generous benefits.
c. the benefits will be the same at both companies, since benefits are based on salary.
d. the unionized firm will likely offer no benefits, because these firms are encountering
severe cost-pressures due to global competition.
9. Anna has been called to serve her tour of duty in Iraq as a reserve officer in the Marines. She is leaving
for the war zone in 30 days. Which of the following statements is TRUE?
a. Anna’s employer is required by federal law to pay her the difference between her military
pay and her civilian pay.
b. Anna’s employer is required to give her military leave. But, if Anna was only called for
training, she would have to use personal vacation days rather than leave.
c. Anna’s employer can require her to use up her three weeks of paid vacation while she is
deployed.
d. Anna’s employer is not required by law to pay her while she is on military duty.
10. Pfalz Bakeries, Inc., has experienced problems staffing its operations during the week of Mardi Gras,
even though this is a busy and profitable time period for the company. Many employees schedule their
vacations during Mardi Gras, but demand for king cakes peaks during this week. The HR manager feels it
would have a negative impact on employee morale to ban any vacations during Mardi Gras week. Which
of the following is the best option for the HR manager?
a. Require employees to work the last scheduled day before Mardi Gras and the first
scheduled day after Mardi Gras.
b. Give employees free king cakes every day during Mardi Gras week.
c. Close down the bakery during Mardi Gras and give employees a week of unpaid vacation.
d. Pay employees who work during Mardi Gras week time-and-one-half.
11. A group of employees has approached the HR manager with a request that the company sponsor a softball
league. The HR manager thinks this is a good idea because a company softball team will
a. improve employee productivity.
b. decrease absenteeism.
c. increase team spirit among employees.
d. improve employee health and wellness.
12. Why do a relatively low percentage of men take paternity leave?
a. Men who are not single parents are not covered in the Family and Medical Leave Act.
b. Employers can deny FMLA leave if the employee is not replaceable. Men tend to hold
jobs that are more critical than women do.
c. It is not socially acceptable for men to stay home for child-related reasons.
d. Only one parent per family can take FMLA leave.
13. A typical abuse-control measure to keep employees from taking excessive time off around holidays is to
a. require employees to work the first and last scheduled workdays around the holiday.
b. allow only employees with significant seniority (e.g., five years) to combine holidays with
vacation days to extend the employees’ time off.
c. pay employees time-and-a-half for working the days immediately following and preceding
a holiday.
d. allow employees to “bank” holidays and take the days off at less busy times of year.
Chapter 15—Risk Management and Worker Protection
MULTIPLE CHOICE
14. Computer security issues are most critical when
a. new employees are hired.
b. an employee is transferred to a different department in the company.
c. an employee is terminated.
d. a contract worker is accessing the computer.
15. MegaMonument conducts all appropriate and legal tests and background checks to screen new hires. But,
one of MegaMonument’s employees strikes and harms a customer who the employee believes has
insulted him. In this case, MegaMonument
a. would probably be legally liable for the harm to the customer.
b. would probably not be legally liable for the harm to the customer.
c. could avoid liability if this employee was a security officer.
d. would be liable if the employee’s record had shown an arrest for a violent crime.
16. After a disaster with widespread impact in a city or region, the most urgent HR function is to
a. establish communication with employees.
b. secure physical plant and equipment.
c. re-establish the organizational chain of command.
d. calculate losses for insurance purposes.
17. Current concerns about pandemic diseases have caused OSHA to issue special guidelines for
a. companies with large numbers of expatriate employees in developing countries.
b. federal government contractors in the Middle East.
c. the poultry industry.
d. the healthcare industry.
18. A large department store was the scene of a homicide. One of the sales associates in the designer clothing
department was shot dead in front of her co-workers and customers by her estranged ex-husband. HR
swung into action with a post-violence response in accordance with recommended practices. The HR
department would probably implement all of the following EXCEPT
a. referring employees to EAP resources.
b. closing the department store for a week out of respect for the slain worker.
c. giving employees time to meet with HR staff.
d. bringing trained counselors on-site.
19. The CEO of a medium-sized insurance company in a medium-sized city in Iowa is reluctant to authorize
the expenditure for a security audit. The CEO maintains that since Iowa is not subject to hurricanes or
earthquakes, there are no obvious terrorist targets nearby, and the city has almost no violent crime, that a
security audit would be a waste time and money. As the director of HR, you should
a. agree with the CEO because of the low probability of security threats.
b. point out that OSHA requires security audits for firms with over 1,000 employees.
c. indicate that insurance premiums are lower for firms that conduct security audits.
d. argue that the firm may be vulnerable to malicious or deranged employees or outsiders
with access to the facility, and that the company deals with sensitive data.
20. The company with the LEAST reason to control access to its facilities is a/an
a. branch of a U.S. company operating in Nicaragua.
b. pharmaceutical manufacturing firm.
c. oil refinery.
d. department store.
Chapter 16—Employee Rights and Responsibilities
MULTIPLE CHOICE
21. As Director of HR for a utility which operates three nuclear plants, you have been approached by the
CEO regarding implanting Radio Frequency Identification chips into employees who have access to
critical areas of the plants. With terrorism and sabotage being increasingly worrisome, the CEO thinks
that this might significantly improve security in the plants. He asks your opinion. You respond that
a. the main issue is balancing the financial costs of implanting the chips against the
incremental improvements in security.
b. employee privacy and civil liberties issues are a major concern.
c. legal concerns will be minimized if current employees who refuse to have chips implanted
are allowed to transfer to equivalent jobs without loss of seniority.
d. implanting chips in employees, even with their consent, is always illegal.
22. Claudette is being terminated from her position as Chief Financial Officer of a private university. She has
signed a separation agreement not to sue the employer. This agreement is legal if
a. Claudette has legal counsel when negotiating the agreement.
b. Claudette receives additional consideration for signing the agreement.
c. the agreement is confidential.
d. Claudette is not being fired for illegal activities.
23. When terminating an employee
a. the termination location should be visible by others, such as a glass-windowed office, so
that violence is less likely.
b. only the employee’s supervisor should be present.
c. regardless of the employee’s apologies for past failings and promises to improve, the
termination must proceed.
d. in order to counter rumors, the employee’s co-workers should be told exactly why the
employee was terminated.
24. The final stage both the progressive and the positive processes is
a. a “decision day off.”
b. counseling.
c. termination.
d. mediation.
25. Leyla has received high performance appraisals for the three years she has worked for a medium-sized
insurance firm in the rural Midwest. Leyla’s job involves telephone support for customers who have
questions. When Leyla returned from her vacation, she had gotten three facial piercings. Leyla’s
supervisor informed Leyla that he did not feel this was appropriate for the workplace. Leyla replied that
it was no different than some of the other workers who wore two and three earrings in each ear. The
company has no appearance policy. Leyla’s supervisor is asking you, the HR manager for the firm what
he can do. You tell the supervisor
a. Leyla’s piercings are the equivalent of free speech and he cannot legally ask her to remove
them.
b. Leyla’s job requires her to speak clearly on the phone. If her piercings cause her speech to
be poorly understood, the supervisor could require Leyla to remove those piercings that
interfere with her speech.
c. the company has no appearance policy, so the supervisor is not restricted in the appearance
rules he sets down for his employees.
d. if Leyla’s co-workers petition the supervisor to require Leyla to remove the piercings, he
can do so on the grounds that Leyla is disrupting the workplace.
26. It is common practice for terminated employees to be removed from the workplace as soon as possible
either without returning to their work station or by quickly clearing out their work station under the
supervision of security personnel. This policy is intended to
a. prevent violence or sabotage by the terminated employee.
b. serve as vicarious (observational) learning for co-workers that certain behaviors in the
workplace have serious consequences.
c. make lawsuits of wrongful termination less likely.
d. humiliate the terminated employee as part of the discipline process.
27.Sally was found intoxicated from illegal drug use at work, although she took the drugs on her off-time. She
was immediately terminated. The company has a progressive discipline process. Sally’s firing
a. was inappropriate and lacks due process because it violates the company discipline
procedure.
b. was premature. Sally should have been counseled before any other disciplinary action was
taken.
c. was appropriate. The progressive discipline procedure is not applied for certain serious
offenses.
d. may be illegal since Sally used the drugs off-work and was only slightly “high,” not
significantly impaired, when she reported to work.
Chapter 17—Union/Management Relations
MULTIPLE CHOICE
28.
The newly-formed Change to Win Federation is targeting all of the following for unionization attempts
EXCEPT
a. immigrant workers.
b. companies that outsource jobs overseas.
c. public sector workers.
d. nurses.
29. In a unionized workplace, ____ are formal communications channels designed to settle formal complaints
as soon as possible after the problem arises.
a. grievance procedures
b. contract administration procedures
c. employee complaint processes
d. interest arbitration processes
30. Amanda was suspended for three days by her supervisor for a disciplinary violation covered in the union
contract. Amanda denies that she committed this violation. She says that the supervisor “has it in for her.”
She is filing a grievance. Amanda’s first step will be to
a. meet with her union steward and supervisor.
b. file a written complaint with the HR manager of the plant.
c. contact the national union representing the worker in her company.
d. apply for arbitration of her grievance.
31. Clark’s supervisor has asked to speak with him privately about an “important matter.” Clark is a
unionized employee. He suspects that his supervisor plans to give him a written warning about missing
his daily production quota. According to Clark’s Weingarten rights
a. his supervisor may not discipline a unionized employee unless the formal grievance
procedure has begun.
b. the supervisor must request permission from the union steward to question Clark.
c. he may file a grievance against management if the interview results in discipline.
d. Clark has the right to insist that a union representative be present.
32. ____ settles disputes arising from different interpretations of a labor contract.
a. Complaint conciliation.
b. Grievance mediation
c. Grievance arbitration
d. Contract interpretation
33. Which of the following statements is FALSE?
a. Weingarten rights apply only to unionized employees.
b. Employers may voluntarily allow non-union workers to have a co-worker present if the
employee feels that a meeting with management may lead to discipline.
c. Unionized employees who are going to be questioned by management and who feel
discipline may result have the right to have a union representative present.
d. Non-union employees have the right to have co-workers present in grievance procedure
meetings.
34. By the time a grievance has reached the step just before arbitration, the ____ has become involved.
a. the FMCS
b. the NLRB
c. the national union
d. the AFL-CIO or the CTWF
35. A potential problem for unions if union members take part in employee stock ownership plans is that
a. the union and management may be accused of collusion.
b. the union solidarity of employees may be eroded.
c. the union may become dominated by management.
d. if the employer goes bankrupt, its creditors may have access to union funds.
36.
Grocery Giant, a national chain of grocery stores, was locked in a long and bitter economic strike with the
union representing its employees. During the strike, Grocery Giant replaced the striking workers. Now
that the strike is over, many of the strikers want to have their old jobs back. Grocery Giant
a. must rehire these former employees in states where there are right-to-work laws.
b. may refuse to rehire the strikers.
c. cannot legally rehire these former employees.
d. must rehire these former employees in all states in which Grocery Giant operates.
ANSWER KEY
1. B
25. B
2. C
26. A
3. C
27. C
4. B
28. C
5. D
29. A
6. D
30. A
7. C
31. D
8. B
32. C
9. D
33. D
10. D
34. C
11. C
35. B
12. C
36. B
13. A
14. C
15. B
16. A
17. C
18. B
19. D
20. D
21. B
22. B
23. C
24. C