William Anders became the CEO of defense giant General Dynamics in 1991, when the Cold War is over, as the industry has become burdened with excess capacity. Noting that the company was underserving shareholders and requires a massive change in its culture, Anders brought in a new management team and introduced a new compensation system that better aligned the interests of managers and shareholders. Particularly controversial was the Gain / Sharing System, which paid large bonuses in cash for each $ 10 increase in the price of the shares. This plan has been widely criticized for rewarding top managers to control the prices of shares through public announcements of layoffs and sales. However, by the end of 1991 the share price has risen by 113%, or $ 1.2 billion increase in shareholder wealth during the year. Those Purpose: This case can serve several purposes. First, it provides an introduction to executive compensation. Second, it emphasizes the importance of linking incentives and corporate strategy in the context of reducing the industry. Finally, the case can motivate discussion and reducing unemployment and dignity of rewarding executives for cutting excess capacity. "Hide
by Kevin J. Murphy, Jay set Source: Harvard Business School 19 pages. Publication Date: October 25, 1993. Prod. #: 494048-PDF-ENG
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