Replies to post #8123 on GTC Biotherapeutics (fka GTCB)

[poorgradstudent]

>1. The question of whether management tried hard enough is separate from the question of whether they succeeded. <

Sure. But it ties into how strongly they are vested in the efficient maximization of the value of the company.

>2. If the Board thinks management should be retained and needs an incentive and that the existing out of the money options don't provide enough of one, would your remedy be to fire existing management, thereby triggering severance and vesting of their existing options, and then grant an entirely new package of currently priced options to the new management? Assume for this purpose that the Board thinks management should be retained -- which requires assuming that the Board thinks anything at all. <

This is getting tangential.

- If the board thinks that a CEO is not worth keeping, then the financial consequences of that change in leadership should not be a deterrent.

- If the board thinks that management should be retained, and they've seen a decline in shareholder value over the long term, then the reasonable course of action is to conclude that the means of incentive to date have been, by and large, ineffectual.

Boards get into problems by signing CEOs to longer term deals with guarantees and silly targets that aim to keep the CEO pay at the top X% of all CEO salaries. That's their fault, and it neuters them *if* they really wanted to tie in a CEO's pay and performance to the value of the company.

>3. This is an academic question to me, personally I think the CEO is more than adequately compensated (although he does merit extra pay given the upperclass accent) and that his existing equity holdings provide him with plenty of incentive to perform. <

I would agree. I would kill for 325K a year in salary, let alone 650K. Hence my point that his paper loss on option holdings isn't keeping him up at night.

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I'll make another side wager: Cox would keep his job for 400K a year. The CEOs *know* they're making out well, and if the remuneration (handout?) climate changed, few would hesitate to take substantial pay cuts simply to remain at their position.