Duckworth Industries - Incentive Compensation Programs Case
In the current case, Team A examines Duckworth Industries, Inc. - an
industrial manufacturer - in order to evaluate its current and
proposed incentive compensation programs. Analysis and recommendations
follow.
Duckworth Industries, Inc., has several incentive compensation
programs for different levels of employees, each designed to address
different problems or productivity issues. For plant-level employees,
Duckworth has an attendance bonus program to reduce tardiness. For
employees up to the shift supervisory level, Duckworth has a quality
incentive plan to reward those who ensure high quality in their
products and services. Duckworth also has a profit-sharing plan for
all employees. Profit sharing rewards employees for increasing the
company's profitability.
Duckworth offers individual incentive plans for all sales and
supervisory personnel to improve accuracy, turnaround time, and sales
growth. The annual incentive compensation plan is reserved for senior
managers, some of which also participate in a long-term program.
Duckworth implemented these programs to reward managers who achieve
certain performance goals, in areas such as cash flow, sales growth of
proprietary products, direct labor variances, inventory turns,
accounts receivable, gross margins, and special individual projects.
Duckworth?s top level executives recently participated in a five-year,
long-term management incentive plan: a phantom stock plan tied to the
company?s growth and profitability over a period of several years.
Before considering the Economic Value-Added (EVA) compensation
incentive plan proposed in the current case, Duckworth Industries used
different ...
... middle of paper ...
...ng information. The performance targets should be reevaluated
each year and set to company, business unit, or individual objectives.
A plan that allows management to become "owners" will maximize
shareholder wealth and minimize internal conflict.
References
Industrial Distribution Group (2005). Company homepage. Retrieved 30
May 2005, from www.idglink.com/home/home.asp.
Kleiner, M. (1992). Incentive pay: Not just for top management. Work
Study, 41, (2), 16. Retrieved 30 May 2005, from EbscoHost database.
Kunkel, J.G. (2005). Compensation plans and the new stock option
accounting rules. The CPA Journal, 75, (1), 28. Retrieved 30 May 2005, from
EbscoHost database.
Savage, M. (2004). Employee stock options: New valuation
responsibilities and planning opportunities. Benefits Quarterly, 20, (3),
34. Retrieved 30 May 2005, from EbscoHost database.
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