One type of benefits involves giving workers discounts on the firm’s products. We noted that this type of system could reduce the firm’s costs by reducing some marketing expenses.
A. Explain why offering such discounts (as opposed to increasing workers’ cash wages by an equivalent amount) can also help to attract a more knowledgeable or enthusiastic sales staff.
B. Very few firms pay workers entirely in the form of merchandise discounts (or even just in the form of merchandise itself). Why not? Explain in terms of the cost the firm must pay in order to attract workers.
C. (This is related to part (b).) Many high-ranking executives receive part of their pay in shares of the firm’s stock, supposedly to motivate them to work to increase the firm’s stock price. In order to ensure the executives remain motivated, their contracts usually prohibit them from selling those shares for a long period of time. Question: Explain how the restriction on stock sales may force the firm to pay the executive more than it would if it simply paid the executive in cash.