Heavy compensation based on EBITDA is frequently employed by acquisitive companies. Look at $SSNC. 63% of CEO comp is a cash bonus based on EBITDA.
If EBITDA is the benchmark, then naturally management will favor acquisitions and scale over profitabilityhttps://www.ssctech.com/about-us/acquisitions …
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Replying to @Tinyvalue
Except in this case the CEO is the largest shareholder with a ownership stake that dwarfs the size of his annual comp
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Replying to @liebo7
You are right. But take care to remember that the assumption of ownership = alignment can be fallible if the incumbent CEO already has a substantial amount of wealth outside the company. Also note the complexities of acquisition accounting and forecasting acquisitive companies.
5:08 PM - 7 Jul 2019
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