5) Reduce fluctuations in executive option based incentive pay - Executives paid in options have huge amounts of uncertainty about their future income. Smoothing the variation in cash flow and hence stock price reduces uncertainty. It is at least theoretically possible that this reduction in uncertainty can be passed on to the owners via a decreased demand in salaries by future management teams.
6) New positive projects - The domestic plateau in cigarette consumption has limited Philip Morris's pool of good projects for investment. They must find new avenues, return cash to shareholders or invest in bad projects. Since managers never prefer to reduce assets under their management, new avenues are the better option compared to projects that will destroy company value. By returning cash to shareholders in large amounts the company is basically admitting the fact that management has run out of good ideas (Morris Case Study).
The comprehensive case study analysis will take a closer look at the underlying tone of what made this acquisition possible. It will examine the position of not just Philip Morris, but also the Kraft perspective. It will look into the economic circumstances that were taking place at that time that lead to the events that followed. All financial issues will be discussed.