La-Z-Boy Inc. (LZB) has been hit hard by the slump in the housing market and the overall decline in consumer spending. This means that the firm's top 120 managers might not get as much incentive pay since part of their compensation is based on three years of the company's earnings. Now, the board is faced with a decision to either face a mass exodus of talent or change up the company's executive compensation plan to give management another change. It's a difficult situation that will either alienate shareholders or management.

The board determined that the drop in LZB have made its stock awards program unrealistic and would not provide management with incentives during the three year period. So, the board decided to dump its long-term plan in favor of two short-term ones. Now, La-Z-Boy executives can earn 50% of their stock wards based on the company's performance from December 28th to April 26th (just four months!) and the other half in fiscal 2009 beginning in late April. Shareholders argue that changing the rules mid-game defeats the purpose of such programs...