Case | HBS Case Collection | April 1999 (Revised March 2002)

Gerald Weiss

by Brian J. Hall and Carleen Madigan

Abstract

Gerald Weiss left Wall Street for the promise of a CFO position at a well-established corporation. He was given a 10-year options package with a guaranteed floor of $12 million and unlimited upside. To ensure the entire package would be worth at least $12 million after 10 years, Gerald negotiated a special provision, which gave him the ability to "gross-up" his options twice over those ten years. If the stock price fell substantially, Gerald would be awarded more options (at-the-money) to bring the entire Black-Scholes value of his package back up to $12 million. Because of the company's culture of informality, the deal was agreed to with a handshake from the CEO, witnessed by the current CFO and the VP of human resources, but not written down. When the stock price actually fell, and Gerald asked to revalue his options package, the company reneged on the deal. Teaching Objective: To generate discussion about the benefits and pitfalls of mega-option grants, the issue of revaluing options, and the conflict between adhering to company culture and protecting the financial interests of the employee.

Keywords: Management Teams; Resignation and Termination; Executive Compensation; Organizational Culture; Agreements and Arrangements; Stock Options; Conflict and Resolution; New York (city, NY);

Citation:

Hall, Brian J., and Carleen Madigan. "Gerald Weiss." Harvard Business School Case 899-258, April 1999. (Revised March 2002.)