Sally Jameson

November 20, 2017

Guidelines for case presentation and discussion

1. Each group should obtain a copy of the case Sally Jameson: Valuing Stock Options in a
Compensation Package (case # 5-204-132), from the Harvard Case Website:
http://cb.hbsp.harvard.edu/cbmp/access/71497241. Group assignments are available
on Connect, in case you forgot which group you belong to.

2. Read the case document. Do not talk to anyone else outside your group about any part of
this assignment until class discussion. We will discuss the case on Monday, November 20,
2017.

3. Each group should prepare a 2-pages (max) memo addressing the questions listed in point
4 below. The memo should be turned in at the beginning of class.

4. Your memo should address the following questions regarding the case:

(a) If we ignore tax considerations and assume that Sally Jameson is free to sell her options
at any time after she joins Telstar, which compensation package is worth more?
(b) How should we factor in the complications ignored in the above question? How would
they affect the value of the option to Ms. Jameson? What should Ms. Jameson do?
Why?
(c) Does granting stock options cost companies anything? If so, who pays? What incentives
do executive stork option plans create for their recipients? Can firms create more effective
incentives? If so, explain how.
(d) What if Ms. Jameson decided that the option was a better deal, but that she didnt
want all of her financial wealth (as well as her human capital) tied to the fortunes of
Telstar? Assuming she works at Telstar and accepts the option grant, is there anything
she can do to untie some of her wealth from Telstar?

5. In addressing the questions above, you should try to put yourself in the shoes of the case
participants at the time of the case. You may do additional research, but you cannot use any
information that is of the perfect-hindsight sort. You may not look at or use case materials
from any other source, such as slides, spreadsheets or discussions from other universities that
may be available on the internet or otherwise. Other schools assign Harvard Business School
cases, but you may not use their discussions,materials, or solutions in any way.

6. You overall participation mark for the class will depend also on the quality of the memo,
and of your participation during the case discussion.

7. Please feel free to come and see me if you have any questions while you prepare for this case
discussion.