A public traded company was facing a dilemma of losing its CEO – the son of the owner – owing to the low salary he was receiving compared to similar companies and in general. There was no doubt, besides being the son of the owner, that he was a highly talented man and his loss would result in a significant decrease in the company’s income cash flow.
However, it was obvious that given that a pay rise would be a transaction with a stakeholder, it would result in institutional entities objecting to a salary that they would consider inappropriate, particularly given the identity of the owner, who was a controversial figure in the capital market.
Accordingly, a study was held covering all the wage recipients of traded companies in that sector, and it was suggested that the new salary be established at the center of the table of counterparts of the CEO in the market, to which salary the CEO had consented, and summon the general meeting for Thursday afternoon.
When the discussion on the salary issue arose, the institutional entities objected as expected, although the salary offered was median for the sector. Accordingly, the institutional entities were given the contact information of a duty judge and were told that refraining to approve the salary would result in them having to contact a duty judge to explain their objections. The meeting was stopped and following negotiations with the institutional entities it was agreed that there would be no further pay rise for two years from that time. Accordingly, the pay rise was agreed to unanimously.