In firms with multiple salespersons, it is common to observe that part of their

Question

In firms with multiple salespersons, it is common to observe that part of their compensation is determined by "benchmarking", in which the performance of a firm's salespersons, say firm A, is compared with the performance on another (similar) firm's salespersons, say firm B. An extra bonus is paid if firm A's salespersons outperform firm B's salespersons.

A. This practice is consistent with Principle II.
B. Since the performance of firm B's salespersons provides information about the performance of firm A's salespersons, it should be included as part of the compensation scheme of firm A's salespersons.
C. This practice allows firm A to reduce the risk in their salespersons' compensation.
D. All of the above.

Explanation / Answer

C. This practice allows firm A to reduce the risk in their salespersons' compensation.

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