Donald Salter Communications Inc Case Solution

However, because of the negative balance in the prescribed special tax account, it could not attain that status (Gilson, 2010). The family-owned business had issues with keeping all stakeholders happy and on the same page. The minority stakeholders were willing to sell their stake. People were resistant to change and increasing standards of accountability as well (Gilson, 2010). The economic score boarding proposed by Myers faced critics and was not accepted by people.

2. Compensation Plan

The main problem with the company is its declining income and cash flows as mentioned in Exhibit 20.1. Compared with other players in the market, the company is also struggling to maintain Earnings as % of sales (Exhibit 20.2) which is becoming negative. The short-term incentive plan does not needs to be cash-intensive in a company struggling with cash flows. For higher percentages, the bonus is even higher than achieved cash flows (Exhibit 20.3). The percentage cap needs to be a maximum of 50% for all participants. The vesting factor below is calculated using a lesser value of 0.9 and employment of 9 months (Exhibit 20.5)

Meyer’s Package should be more focused on annual targets rather than long-term market values especially when it is difficult to determine.

3. Executive Incentive Plan

As per the incentive plan Exhibit 20.5, the factor of growth rate is accommodated in the incentive plan which will affect the value of multiples and ultimately the target Award and Plan award (Gilson, 2010). In this manner, the incentive plan is associated with the market value of the company. However, the calculations are complicated and the adjusted value of the company would be calculated on the stock value at the particular date which does not seem a good plan. It can be manipulated and would be difficult to determine for a particular date as the company is not publicly traded.