Tad Folsom and Peloton Industries

Abstract

Tad Folsom, the newly appointed chair of the audit committee of Peloton Industries, is preparing for his third meeting with the board of directors since being elected to it six months earlier, in July 2010. Bill Pelo, Peloton's CEO, is retiring soon, and the board is eager to have the right management team in place. Folsom is aware that some board members want a drastic change in Peloton's approach to executive compensation and expects input from him. Peloton has never issued stock options before. In general, the practice is not common for medical manufacturing companies, although it is more so in the overall healthcare sector. Folsom remembers his four years as CFO for Healthsource Home Care Inc. (HHC), a multihospital and long-term care system based in the Northwest. HHC had granted stock options as part of its executive compensation package, and Folsom had witnessed several negative changes in behavior as a result. He is eager to avoid similar issues at Peloton while, at the same time, encouraging the adoption of the proper alignment of incentives between management and the shareholders he represents. Excerpt UVA-C-2319 Rev. Nov. 30, 2011 Tad Folsom and Peloton Industries You can attract some amazing talent if the compensation package is strong. Lawton asked for us to consider granting stock options to keep the right management team in place. We need to build strong incentives if we are going to continue to grow. —Peloton Industries Board Member Tina Jeffries Tad Folsom, the newly appointed chair of the audit committee of Peloton Industries (Peloton), had spent most of the four-hour flight from San Francisco to Atlanta reviewing his notes. He was preparing for his third meeting with the board of directors since having been elected to it six months earlier, in July 2010. Bill Pelo, Peloton's CEO, was retiring soon, and the board was eager to have the right management team in place. There had not been much time for Folsom to review the items on the agenda during the week-long medical-imaging conference he had just attended, but he was aware that some board members wanted a drastic change in Peloton's approach to executive compensation and expected input from him. Peloton had never issued stock options before. In general, the practice was not common for medical manufacturing companies, although it was more so in the overall healthcare sector. . . .