Amber, a publicly held corporation, currently pays its president an annual salary of $900,000. In addition, it contributes $20,000 annually to a defined contribution pension plan for him. As a means of increasing company profitability, the board of directors decides to increase the presidents compensation. Two pro- posals are being considered. Under the first proposal, the salary and pension contri- bution for the president would be increased by 30%. Under the second proposal, Amber would implement a performance-based compensation program that is pro- jected to provide about the same amount of additional compensation and pension contribution for the president.

a. Evaluate the alternatives from the perspective of Amber.

b. Prepare a letter to Ambers board of directors that contains your recommenda- tions. Address the letter to the board chairperson, Agnes Riddle, whose address is 100 James Tower, Cleveland, OH 44106

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