Executive Compensation and Corporate Strategy at General Dynamics

Harvard Business School Working Paper Series 94-064

Posted: 20 Dec 1998

See all articles by Jay Dial

Jay Dial

Ohio State University (OSU) - Human Resource Research

Kevin J. Murphy

University of Southern California - Marshall School of Business; USC Gould School of Law

Date Written: April 1994

Abstract

In 1991, defense contractor General Dynamics (GD) adopted an objective of creating shareholder value through downsizing, restructuring, and exit. Facilitating GD's strategy were a new management team and compensation plans that tied executive pay to shareholder wealth creation. The plans became highly controversial as GD's executives reaped rewards amid announcements of layoffs and plant closings. By December 1993, shareholders had realized gains approaching $5 billion, representing a three-year return of 440%. The lessons from the study are applicable not only in firms in the defense industry, but also in firms in a growing number of declining industries saddled with excess capacity.

JEL Classification: G32, J31, J33

Suggested Citation

Dial, Jay and Murphy, Kevin J., Executive Compensation and Corporate Strategy at General Dynamics (April 1994). Harvard Business School Working Paper Series 94-064, Available at SSRN: https://ssrn.com/abstract=5311

Jay Dial

Ohio State University (OSU) - Human Resource Research ( email )

700 Fisher Hall
2100 Neil Avenue
Columbus, OH 43210-1144
United States

Kevin J. Murphy (Contact Author)

University of Southern California - Marshall School of Business ( email )

BRI 308, MC 0804
Los Angeles, CA 90089-0804
United States
213-740-6553 (Phone)
213-740-6650 (Fax)

USC Gould School of Law

699 Exposition Boulevard
Los Angeles, CA 90089
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
4,717
PlumX Metrics