Andreas Delon’s Compensation. Andreas Delon is a French citizen who has been offered the position of CEO of LakePharma, a large French pharmaceuticals firm. LakePharma produces high-quality chemicals used by pharmaceutical firms around the world. Much of the production of LakePharma is sold in Switzerland, which means that Andreas Delon will spend most of his time there helping to market LakePharma’s products to Swiss pharmaceutical firms. He wishes to be paid in euros, not Swiss francs

(CHF). LakePharma has agreed to pay Andreas’ base salary in euros, but insists on paying his sales commission and bonus (amounting to 25% of his base salary)

in Swiss francs. Andreas is unable to decide whether to agree to this suggestion or to insist on receiving all his remuneration in euros. He constructs the table on the next page showing the sales revenue to help him decide. What do you recommend for Andreas?

Year (million euros) Change CHF = 1 EUR (million CHF) Change 2015 €1,000 ________ 1.05 CHF ______ ________ 2016 €1,100 ____% 1.06 CHF ______ ____%

2017 €1,250 ____% 1.07 CHF ______ ____%

2018 €1,300 ____% 1.08 CHF ______ ____%

French Parent (euros, €)
Swiss Subsidiary (Swiss franc, CHF)
British Subsidiary (British pound, £)
Danish Subsidiary (Danish krone, DKK)
Earnings before taxes (EBT) in 000s of domestic currency €2,500 CHF400 £2,100 DKK4,500 Corporate income tax rate 33.3% 25% 20% 23%
Average cross rate for the period — CHF1.0335/€ £0.7415/€ DKK7.4642/€