Business Case Studies & Business Publications

Charter Communications: Ensuring the Rig...

Loutskina, Elena

Case

Charter Communications: Ensuring the Right Path Forward

Loutskina, Elena

F-1814 | Published September 19, 2018 | 16 Pages Case

Collection: Darden School of Business

Product Details

This case explores the considerations of an executive compensation analyst as he finalizes a report to the compensation and benefits committee of Charter Communications (Charter), a leading broadband and communications company, on the appropriate compensation structure for Charter's CEO, Thomas Rutledge. Charter's board clearly wanted to retain Rutledge, but in the world of executive compensation, it was not enough to have the biggest payment package. Proper incentives and moving performance targets were essential for companies that wanted their executives to strike the right balance between risky maneuvers and safe, consistent success. The analyst must be careful to cover all of his bases in his report, balancing outright monetary rewards with proper long-term incentives. This case was developed for a core finance class and is currently used at Darden to both (a) build understanding of put and call options; and (b) explore dimensions of executive compensation and how they affect incentives of the company executives. It also allows for a basic call/put option valuation exercise where students can estimate the total value of the compensation the board is about to offer Rutledge.

- Introduce call and put options. - Introduce all dimensions of executive compensation. - Identify how different components of executive compensation—options, stocks, and bonuses—affect managerial incentives. - Introduce the Black–Scholes formula for option valuation. - Develop intuition for factors that affect the value of the call and put options.