Question

In: Finance

Assume the following: This is a large conglomerate company with over 30 divisions and over 24,000 employees,...

Assume the following: This is a large conglomerate company with over 30 divisions and over 24,000 employees, but the company might be in financial trouble. Company divisions are so different that EVERY type of benefit / retirement plan is available to all employees.

Scenario 1

Married individual with young children at entry level position

Scenario 2

Mid-level manager with grown children seeking a long career and a comfortable retirement

Scenario 3

Top executive nearing retirement and hired to solve financial difficulties.

ADVISE each of your three clients on the following:

Compensation

Equity Options

Deferred Compensation (both qualified and nonqualified plans are available)

Health and Disability

Life Insurance

Fringe Benefits

Expert Solution

Given that company is in financial trouble. So, the options that company should consider be such that it puts less burden on the company.

For entry level individuals, company can look at providing health insurance benefits as it gives complete cover to their family and premium that company could incur be negotiated with insurance providers for health, life insurance and disability. Compensation can be benchmarked with industry standards. More fixed and less variable. Less equity options preferred. No fringe benefits to be provided.

For mid level managers, they would have good experience. So better compensation should be provided with variable payment significantly. This will give them push to contribute and make their team work well. Medical insurance and other insurance benefits can be provided. Some schemes can be introduced where individual working for 5 to 10 years should be given additional bonus like equity options. Also provide fringe benefits. Deferred Compensation can also be considered.

For top executives nearing retirement- give them equity share in the company. Since they are nearing retirement, they might demand for high compensation. Since the company is in financial trouble, share price might be below par. Top executives will be well settled and so they would be willing to take equity and if company comes out of trouble, it would benefit them. Also, this is win win for company because the burden on company also reduces

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