As described in the case, Warren Buffett met with and had a steak dinner with Jeffrey Immelt; Warren advised him: (a) “to stay away from tying compensation to stock price, and (b) to base the new program on simple targets”. As described on page 12 of the case beginning in the second paragraph “Immelt’s new package was announced”.
QUESTIONS ARE FROM THE CASE AS FOLLOWS:
1. Identify and briefly describe each element of this NEW (NEW!!!!) package, specifically dealing with elements other than annual incentives or base salary (FOCUS ON EQUITY, LONG-TERM INCENTIVES).
2. For EACH element of this NEW (NEW!) compensation package as identified in 1) above, comment briefly on whether each element is consistent with Buffett’s advice as quoted in (a) and (b) items on the previous page (see previous page-in quotes). WHY? WHY NOT?
3. In your opinion, is Buffett correct i.e. stay away from a tie to stock price and keep it simple!!? Why? Why not?
Please answer your questions in bullet points.
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