How concept of risk premium in incentive compensation relate

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1. How does the concept of a risk premium in incentive compensation relate to the concept of a compensating differential in compensation policy?

2. Consider two successful sales companies. One company pays its salespeople a high commission, whereas the other pays its salespeople a straight salary. Assume that both companies are paying their salespeople in an optimal manner. Explain potential differences in the firms that might help to explain the difference in pay policy.

Reference no: EM13921143

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