Facebook uses a mix of cash and equity compensation for its executives. Mark Zuckerberg, as the founder and CEO, has majority voting control over the company due to his ownership of class B shares, which give him around 53-60% of total voting power. As a controlled company, Facebook is not required to have an independent board or compensation committee. However, the company's board is still majority independent and holds meetings without management present. The fact that median Facebook employee pay is over $240,000 could impact corporate governance by prompting public discussions, increasing pressure to raise standard employee pay, and forcing the board to steadily increase compensation.
Detailed analysis of implication of merger between Cooper Industries and Nicholson File Company
The DCF valuation excel can viewed at:
https://drive.google.com/file/d/0B6nSS-YiZgneVEpVWVA2QWpyX28/view?usp=sharing
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Detailed analysis of implication of merger between Cooper Industries and Nicholson File Company
The DCF valuation excel can viewed at:
https://drive.google.com/file/d/0B6nSS-YiZgneVEpVWVA2QWpyX28/view?usp=sharing
This presentation illustrates the analysis of Harley-Davidson's competitive strategy. It is based on the case from Grant, R., 2010. Contemporary Strategy Analysis. 7th edition, pp. 636-654
Metabical is claimed to be a safe and effective weight loss drug. The case study describe the analysis of marketing strategy used to introduce the drug in the market and also establish a viable positioning for the product.
Dave Carrol, a musician traveled in United Airlines and finds his Guitar being broke due to poor cargo handling. The case tells about the events that followed and how United Airlines responded back and the customer service that was given to Dave and how he responded back.
Executive Compensation at Financial InstitutionsDavid Stone
Executive compensation at U.S. companies has become dramatically disproportionate relative to the average workers at those companies over the past 25 years. Now, the current global financial crisis is putting a harsh spotlight on executive compensation at financial institutions in particular. This report looks at the basic nature of executive compensation packages and the issues or concerns that have been raised about them. That information provides a context for looking specifically at financial institutions: what makes their executive compensation programs different and how the current financial crisis is going to affect those programs.
Executive Compensation: Exploring Models and Considerations in Corporate Remu...assignmentcafe1
Welcome to our comprehensive SlideShare presentation on executive compensation, where we delve into the intricate world of corporate remuneration models and considerations. Join us as we explore the various approaches, challenges, and ethical considerations surrounding executive compensation in today's corporate landscape.
In this enlightening presentation, we aim to provide a nuanced understanding of the complexities involved in determining executive compensation packages. We examine different models and frameworks, including performance-based pay, equity-based incentives, and bonus structures, and assess their effectiveness in aligning executive incentives with organizational goals.
Through a careful analysis of industry practices, regulatory frameworks, and shareholder perspectives, we explore the considerations that shape executive compensation decisions. We delve into the challenges of balancing competitive market forces, ensuring fairness and transparency, and addressing concerns related to income inequality and excessive executive pay.
Furthermore, we examine the impact of executive compensation on corporate governance, organizational culture, and long-term value creation. We discuss the influence of compensation structures on risk-taking behavior, strategic decision-making, and the attraction and retention of top talent within the company.
Our presentation goes beyond theoretical discussions by incorporating real-world examples and case studies. By exploring notable instances of successful and controversial executive compensation practices, we aim to provide practical insights and lessons for organizations navigating this complex landscape.
Through this exploration, we encourage reflection and dialogue on the ethical dimensions of executive compensation. We consider the perspectives of various stakeholders, including shareholders, employees, and society at large, and discuss the importance of designing compensation packages that align with broader social and organizational values.
Join us as we delve into the multifaceted world of executive compensation, analyzing different models, considerations, and ethical implications. Together, let us gain a deeper understanding of the intricacies surrounding corporate remuneration and explore ways to promote fairness, accountability, and long-term sustainable growth.
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Ten Myths of “Say On Pay”
Authors: Professor David F. Larcker, Stanford Graduate School of Business; Allan McCall, co-founder of Compensia and currently a PhD candidate at the Stanford GSB; Gaizka Ormazabal, Assistant Professor of Accounting at IESE Business School at the University of Navarra; and Brian Tayan, Researcher, Corporate Governance Research Program, Stanford GSB.
Published: July 28, 2012
Say on pay is the practice of granting shareholders the right to vote on a company’s executive compensation program at the annual shareholder meeting. Under the Dodd-Frank Act of 2010, publicly traded companies in the U.S. are required to adopt say on pay. Advocates of this approach believe that say on pay will increase the accountability of corporate directors and lead to improved compensation practices.
In recent years, several myths have come to be accepted by the media and governance experts. These myths include the beliefs that:
There is only one approach to “say on pay”
All shareholders want the right to vote on executive compensation
Say on pay reduces executive compensation levels Pay plans are a failure if they do not receive high shareholder support
Say on pay improves “pay for performance”
Plain-vanilla equity awards are not performance-based
Discretionary bonuses should not be allowed
Shareholders should reject nonstandard benefits
Boards should adjust pay plans to satisfy dissatisfied shareholders
Proxy advisory firm recommendations for say on pay are correct
We examine each of these myths in the context of the research evidence and explain why they are incorrect.
We ask:
* Should the U.S. rescind the requirement for mandatory say on pay and return to a voluntary regime?
Read the attached Closer Look and let us know what you think!
To receive monthly alerts about the Closer Look series, please email the Stanford Corporate Governance Research Program at corpgovernance@gsb.stanford.edu. You can also follow more corporate governance
1. You serve as an outside director for the Supplies, a multi-billio.pdfmalavshah9013
1. You serve as an outside director for the Supplies, a multi-billion dollar enterprise. You have
been assigned to the Compensation Committee, which is being formed in response to outside
pressure from shareholders. You note the following. First, activist organizations like CALPERS
have a strong bias towards using options as an incentive compensation for management. Second,
there are a number of scandals involving the use of options for compensation. Please discuss the
policy arguments for aligning the compensation for the top-level executives to the future
performance of the company, and reconcile if possible the two items noted above.
2. You are head of a committee that is evaluating whether your firm should change its state of
incorporation. Currently, you are incorporated in a state that does not have much protection from
takeovers, and the state you are evaluating has very strong anti-takeover laws. These laws make
it very difficult for the company to be taken over by other companies. You are finding that many
of your investors are strongly opposed to the move, while the CEO and upper management seem
in favor. What can explain these two opposing positions?
Solution
The policy arguments for aligning the compensation for the top - level executives to the future
performance of the company by way of stock options are as follows:
1. It gives a sense of ownership to the employees.
2. If the business is doing well, it will reflect in the share price and thus lead to profits and
financial gains for the employees.
3. Generally stocks have a minimum vesting period and this leads to lower attrition as employees
hold on till the options can be exercised, otherwise there will be loss of profit.
4. It helps the companee in avoiding direct payment of cash for compensation and the employee
is also satisfied by the profits or the scope of profits from the options.
5. To avoid manupulation, strict adherance is rquired in not granting stock options back dated so
as to avoid any employee making gains before a stock has appreciated.
2. The CEO and upper management is of the view to change the state of incorporation so that
their position and company is secured and not asy to overtake. Their objective is to keep the
company safe and keep theor rights. Changing the state of icorporation, gives them a comfort
that under any circumstances, there cannot be a hostile takeover also and the mangement will
still be in there hands.
The investors on the other hand, want to achieve maximum appreciatin on their investment and
hence, if in the future a better management is looking to take over the company, the investors
would we willing for that decision..
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Facebook Inc: A Look at corporate governance Case Study
1. Facebook Inc.
A Look at Corporate
Governance
Group 8:-
Aaryan Jain (20DM003)
Aditi Garg (20DM007)
Aman Aggarwal (20DM024)
Aparna Sharma (20DM038)
Ayushi Bansal (20DM054)
Ayushi Garg (20DM055)
Disha Bhatia (20DM074)
2. OVERVIEW
after
before
after
The Facebook Inc A Look at Corporate Governance Case is
based on a current managerial and strategic problem
being faced by the organization, which must be solved
tactfully to allow progression, as well as maintain a
competitive position.
The case helps examines Facebook's corporate
governance by reviewing information in the company's
proxy statement.
It helps us to become familiar with the nature and type of
information in proxy statements and learn how to examine
various facets of executive compensation and corporate
governance such as the use of stock options and
restricted stock to compensate executives, dual class
share structures, board composition and characteristics,
controlled companies, and classified boards.
3. Summary Compensation
Q1. Review the “Summary
Compensation” (case exhibit
11). What form of
compensation does Facebook
use to compensate its
executives? Why might it use
these forms?
3
Facebook’s compensation
structure is a mix of both
cash and equity
compensation.
The company follows this
method of compensation
because they believe that
equity compensation offers
them the best way to focus
their executive officers on the
company’s mission.
Achievement of the company’s
long term strategic and
financial objectives and to
align the interests with the
long-term interest of our
stockholders.
The company also provides
additional awards which they use
as a long-term retention tool and
provide the executive officers
with long term equity incentives.
4. 4
What might be the pros and cons to using this
form of compensation?
Equity-based compensation is always more complicated than cash.
Need to work with an experienced tax and securities attorney to
ensure that your equity compensation doesn’t need to be
registered under federal/state securities law and meets the
necessary anti-fraud provisions.
The timing and structure of your equity-based compensation will
have numerous tax implications to the company.
There’s always a risk that you’ll end up giving away too much
ownership of the company.
Equity-based compensation may create a problem when the
founders want to sell the company instead of an IPO.
The tax issues associated with equity compensation can get very
complex.
When offering equity to employees, founders may need to provide
more transparency about finances than they expected or are
comfortable with.
Ties the employee's financial reward to the success
of the business, aligning the employee's self-interest
with the Company founder's self-interest
Does not generally involve Company cash and is
therefore an attractive compensation technique for
the company
Generates "leveraged" tax deductions, namely
deductions in excess of the Company cash expended;
Allows the Company to better attract and retain key
employees.
Pros Cons
5. Q1. How is the value of stock awards determined, and do
these values affect the financial statements?
5
Stock-Based Awards means the right of any kind to receive Stock
or benefits measured by the value of a number of shares of
Common Stock, and each award of any kind consisting of Stock,
in each case, granted pursuant to the Plan or any other plan of
the Company or its Affiliates.
The most convenient way of calculating the value of stock
option(award) is to take the value of the company, divide by the
number of outstanding shares and multiply by the number of
options you have.
Under US GAAP, stock-based awards is recognized as a non-cash
expense on the income statement. Specifically, Stock award
expense is an operating expense (just like wages) and is included
in SG&A and other operating expenses.
6. Q2. Review the “Shares Beneficially owned “
table (case exhibit 5). Why Facebook have two
classes of shares?
How much voting power does Mark Zuckerberg
have?
If the company paid the dividend, roughly
what he should receive?
Why might the difference between voting and
cash flow (Dividend) rights be important?
Facebook has two classes of shares so that it can
provide different voting rights to different sets of
investors. I.e., to Facebook’s large investors and other
shareholders.
Zuckerberg owned about 400 million shares(8.7 million
class A shares , and 392.7 million class B shares)
He also owned additional 48.9 million shares held in
various trusts.
These shares gave him 53.3 % of the voting power
(59.9% if we also include the shares in the trusts.)
Mark Zuckerberg should receive
(8748571+392712180)*5.49=2,20,40,19,522.99.
7. Q3. What is a Controlled company and a
Classified board?
Controlled Company:
More than 50% of the voting power for the election of
its directors is held by a single person, entity or group
They are not required to have a majority of the board of
directors as independent
They are not required to have a compensation
committee or an independent nomination function
Classified Board:
Directors serve for different term lengths
A classified board will have three to five classes of
positions on the board
A classified board limits the number of board members
up for re-election in any given year
8. 01
02
03
04
Majority of the Board of Directors are independent even
though its a ‘controlled company’
Meetings of BOD are held without the presence of the
management
Members of the committees satisfy the independence
standards established by SEC and Nasdaq rules.
Has a classified Board of Directors consisting of three
classes.
Q3. Read the description of the
Board (case Exhibit 8).
How do you feel the ability of
Facebook’s Board to represent
shareholders?
Facebook’s ability to represent shareholders:
9. 9
Benefits
Interests of the company
are aligned.
Decisive action is easy to
enact.
Right to approve or
disapprove proposed
changes.
No external influence
while carrying out
responsibilities.
Drawbacks
Increased Stock Volatility.
Lesser returns.
One-sided decisions
presiding over company
motives.
Transfer of the resources
of the company for
private purposes.
Q3. What does that
mean for Facebook
investor?
10. The implications of this information in terms of corporate
governance can be as follows:
Public discussions about pay levels can create a
negative impact on the company’s culture and can
reduce the overall morale among employees.
The employees may not like that their pay level is
well below median employee pay or that they’re
being paid far less than if they worked at a competing
company
The disclosures may prompt employees to place
pressure on companies to increase standard
employee pay rates.
Boards may feel that they need to steadily increase
employee pay to keep workers content and prevent
turnover.
Q4. Facebook disclosed the median Facebook
employee has a total annual compensation
over $240,000. What might be the implications
of this information in terms of corporate
governance?