Which theory is based on a reward and punishment system, where good work is rewarded and poor work is punished?

• A. Transformational Leadership
• B. Transactional Theory
• C. Democratic Leadership
• D. LMX

Answer: (B)

This question centers on how performance is managed through an exchange between leader and followers. In transactional leadership, expectations are clearly defined and tied to rewards and consequences. When someone performs well, they receive contingent rewards such as praise, bonuses, or other incentives. When performance falls short, corrective actions or punishments occur to steer behavior back on track. The emphasis is on routine supervision, standards, and the deal that good results earn rewards while poor results bring consequences.

This differs from other approaches: transformational leadership focuses on inspiring and developing followers toward a shared vision, not on a simple reward-for-performance system; democratic leadership emphasizes participation and collective decision-making; LMX concerns the quality of the ongoing relationship between leader and each follower, which can influence rewards but isn’t itself defined by a universal reward/punishment structure.