Brianna Brackett
MGT 511
Week 2: Stanley Black and Decker, Inc.
Incentive Programs
Nolan Archibald’s compensation would entail a lowered annual compensation, a one-
time grant of stock options of 1 million of the combined company’s shares, plus an incentive
plan based on the amount of cost savings achieved. The incentive plan was to get $15 Million if
$225 million is achieved, $30 million if $300 million was achieved, and $45 million is $350
million was achieved. So, after the three years of merging, his bonus would rely on the amount
saved over that time. Archibald also agreed to forego a $20.5 million severance payment. When
reviewing this plan, it seems to be a very beneficial contract. The pros to this contract would be
that could make $24.5 million more within the three years than the severance would have
allowed him to have. The disadvantage to this contract would be that if he gets terminated then
he would have had a lower base salary, and would not get his severance pay. There would be
more uncertainty when saving money, and planning his position at the company financially.
Other incentive plans in the case study was that nineteen other executives have change of
control agreements that trigger payments if they were terminated or experienced change of
responsibilities. These payments noted in the case study totaled around $92.3 million if they
were to be triggered. In addition to these first payments, the nineteen executives would receive a
long-term incentive plan that would allow additional payments due to the merger clause. This
would add a total of $13.2 million dollars. For the same nineteen executives, immediate vesting
of all unvested stock, stock units, and stock options would result in an additional $41.7 million.
The top five senior executives benefit from the supplemental executive retirement plan, which
would add a total of $22.7 million in payments. With these incentive plans, the executives would
find it had to have any disadvantages. When reviewing the listed numbers and contracts, the only
disadvantage would be that the long-term incentive plan does not matter if an executive is
exceeding goals or not meeting them. The performance of executives does not come into play
with any incentive plans.
Projection Pitfalls
While the revenue projections and savings can be major for merging companies, there are
a few pitfalls that are not considered. These pitfalls could potentially be where the mergers go
wrong, including the lack of acknowledgement when discussing revenue dis-synergies, not
comparing the projections with realities, and underestimating the impact of one-time costs.
Acknowledgment of dis-synergies is an important aspect when merging two companies because
the projected earnings can blind the executives to the pitfalls. Dis-synergies are options and
