Guidelines
One Level Up The Fine List Getting Started SWOT Guidelines Outcomes Running The Game Thinking Strategically Performance Measure Peer Evaluation KSF Case Analysis

 

BSG

EXECUTIVE COMPENSATION GUIDELINES

RATIONALE:

In accord with real-world practice, the executive compensation feature places emphasis on individual performance. It underscores performance-based management, team-building, and team-based compensation. This program allows team members to learn to deal with the problems of non-performers and to practice appraising the job performance of co-workers.

The executive compensation feature allows each company to establish salaries and stock option awards for each co-manager. Once the executive compensation program is triggered by the game administrator, salaries and stock option awards will be left to the discretion of team members, subject to certain minimum constraints (discussed herein).
PURPOSE:

[1] To put strong peer pressure on each co-manager to fully participate in decisions, carry his/her share of the load, and make an ongoing contribution to the company’s performance that is recognized and appreciated by the other team members.

[2] To heighten student attention to the merits of a close link between executive compensation and management’s contribution to increased shareholder value [in the form of stock price appreciation and higher dividends].

[3] To enter executive compensation as an important strategic management variable and part of BSG decision-making.
PROCEDURE:

Executive Compensation will be initiated on the second decision (year 12). For this decision as well as the next two decisions, equal compensation packages will be required (years 12, 13, & 14 - equal compensation packages).

For the remainder of the game unequal compensation packages will be allowed, but not required (years 15, 16 - equal or unequal compensation packages).
GUIDELINES:

Once the executive compensation feature is triggered, the automatic 5% annual increase in executive compensation will cease.

The absolute minimum for the combined salaries of all company co-managers is $500,000 per year. There is no upper limit on executive salaries.

A maximum of 50,000 shares can be awarded to any one co-manager in any one year.

Stock option awards to managers will result in the immediate issue of the shares awarded at an issue price equal to the beginning-year stock price. All shares awarded will be immediately purchased and will result in the company having a cash inflow from stock sales.

No stock options or salary increases can be awarded to any company executives in the year following bankruptcy, a loss, a dividend cut or when the company has a bond rating of B or below. It is important to preclude management from awarding itself higher compensation when the company’s performance is subpar or when the company is in financial distress.

The salary of each co-manager not present to participate in a decision should be automatically set at zero for that year. In addition, no stock options should be granted to absentee managers.

Any manager who, because of a majority decision among the company’s co-managers, is compensated in an amount more than 20% below any other company manager is entitled to request and receive a written performance appraisal signed by the other co-managers.

Requests for a performance appraisal should be made in writing (and a copy submitted to the game administrator) not later than 24 hours after the decision results for the year in question are returned. Absent such a request, the executive has no grounds for appealing the compensation decision at any later date. The other co-managers must promptly provide the written performance appraisal to the requesting manager (within 48 hours) and shall also provide a copy to the game administrator.
BONUS: Each company manager whose game-to-date executive compensation at the conclusion of the game exceeds $13 million will receive a bonus of 5 points on their BSG grade; a bonus of 3 points will be awarded to each manager whose total compensation exceeds $10 million; and a bonus of 1 point will be given to each manager whose total compensation exceeds $7 million.

This bonus becomes VOID if your team finishes in Bankruptcy.
FINES: Violation of these Executive Compensation Guidelines will nullify any bonus as well as result in the following fines:

 

 1st time: $1 million
2nd time: $5 million
All subsequent: $10 million

JJJJJJ