Certified Internal Auditor (CIA) Part 3: Business Knowledge for Internal Auditing — Question 160

The board of directors wants to implement an incentive program for senior management that is specifically tied to the long-term health of the organization.

Which of the following methods of compensation would be best to achieve this goal?

Answer options

• A. Commissions.
• B. Stock options.
• C. Gain-sharing bonuses.
• D. Allowances.

Correct answer: C

Explanation

Gain-sharing bonuses are directly linked to the performance and health of the organization over time, making them ideal for encouraging long-term thinking among senior management. Commissions are typically short-term incentives, while stock options may not align directly with immediate organizational health. Allowances do not incentivize performance tied to the company's longevity.