You are the chairman of the board of directors for aninnovative technology company, and you are looking to hire a newCEO. Your shareholders require an 8% return.
Your firm has 1,200 engineers who on average each contribute$240,000 to the annual revenue of the company and receive anaverage annual salary of $120,000.
The first candidate for the CEO position, Jane Doe,successfully increased the productive output of engineeringemployees at her last firm by 5%, and is asking for total annualcompensation of $3,500,000 and a three year contract.
The second candidate for the CEO position is a bit of atechnology superstar, Alan Musk, and at his last company inspiredand increased productive output of engineering employees by 12%,but is asking for total annual compensation of $21,000,000.
Describe in your own words both aspects of the role of thefinancial manager.
What is the name of the conflict that exists betweenshareholders and the CEO?
What steps can you take as the chairman of the board ofdirectors to lessen this conflict?
What would be the ratio of the salary of the CEO to the salaryof the average engineer if you hire Jane Doe? And for AlanMusk?
Social media influencers are starting to criticize the ratiobetween the salary of the CEO and your average engineer. What doyou say to them?
