Discussion of the pros and cons of each proposed contract

Reference no: EM131820920

Question: Agency Theory The Tamura International Trading Company plans to hire a manager for its division in Mexico City. Tamura International's president and vice president of personnel are trying to decide on an appropriate incentive employment contract. The manager will operate far from the Tokyo corporate headquarters, so evaluation by personal observation will be limited. The president insists that a large incentive to produce profits is necessary; he favors a salary of ¥150,000 and a bonus of 10% of the profits above ¥1,200,000. If operations proceed as expected, profits will be ¥4,600,000, and the manager will receive ¥490,000. But both profits and compensation might be more or less than planned. The vice president of personnel responds that ¥490,000 is more than most of Tamura International's division managers make. She is sure that the company can hire a competent manager for a guaranteed salary of ¥400,000. She argued, "Why pay ¥490,000 when we can probably hire the same person for ¥400,000?"

1. What factors would affect Tamura International's choice of employment contract? Include a discussion of the pros and cons of each proposed contract.

2. Why is the expected compensation more with the bonus plan than with the straight salary?

Reference no: EM131820920

Questions Cloud

Physical and performance characteristics of ncaa division : Speed, size, and strength are thought to be important factors in football performance. The article "Physical and Performance Characteristics

Describe the types of bonds the chosen company issues : Describe the types of bonds the chosen company issues, and make a recommendation to the investor as to which type of bond would provide the most value.

What transfer price should Princeton International use : Multinational Transfer Prices Princeton International has production and marketing divisions throughout the world. It produces one particular product in Ireland

Prepare a statement of cash flows for cavamanlis inc : The comparative balance sheets of Constantine Cavamanlis Inc. at the beginning and the end of year 2014. Prepare a statement of cash flows for the year 2014.

Discussion of the pros and cons of each proposed contract : What factors would affect Tamura International's choice of employment contract? Include a discussion of the pros and cons of each proposed contract.

Examine an organizational problem from conflict perspective : Different theory assumptions lead us to different questions. If you examined an organizational problem from a structural perspective.

Determine relative performance of the companies : Compute the return on sales, turnover on capital, and ROI for the three companies, and comment on the relative performance of the companies as thoroughly.

What will be net increase in the denominator of eps fraction : what will be the net increase in the denominator of the EPS fraction if the market price of the common shares averaged $12 per share during 2016

Compare the five basic competitive strategies : Discuss in length, analyze and compare the 5 basic Competitive strategies. Please when they are best used and not to be used.

User Account

All Pages