Business Commons^™

A Fair Wage? Capping Executive Compensation, Julian Friedland

Julian Friedland

This case study highlights some of the latest research on setting executive compensation at ethical levels. The board of directors of Spade’s, a mid-size U.S. hardware chain, considers altering the pay package of its incoming CEO to best align his interests with those of shareholders and stakeholders. Students are invited to assess various components of the incoming CEO’s cutting-edge proposal, which seem attractive and convincing on the surface, but might present certain risks over the longer term. Five compensation components are analyzed, namely, salary capping, pay for performance, bonus scales, stock option parameters, and severance package.