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Austal: The downside of stock compensation

Author

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  • Ong, Alyssa
  • Scheetz, Andrea M.

Abstract

Austal is an Australian company with a subsidiary in the United States that constructs ships for the Navy. In 2023, three employees were indicted by the Department of Justice and charged by the Securities and Exchange Commission for fraud. The case describes how costs for Littoral Combat Ships were artificially lowered to boost earnings. The case also includes general background information on incentive compensation so that students can understand how it typically works, as well as the specifics of Austal’s variable compensation for its key management personnel. This allows for a discussion of how, in this case, incentive compensation was the primary driver for Austal USA’s president, director of Financial Analysis, and director of the LCS Program to commit fraud.

Suggested Citation

  • Ong, Alyssa & Scheetz, Andrea M., 2025. "Austal: The downside of stock compensation," Journal of Accounting Education, Elsevier, vol. 72(C).
    • Handle: RePEc:eee:joaced:v:72:y:2025:i:c:s0748575125000314
    DOI: 10.1016/j.jaccedu.2025.100980
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    References listed on IDEAS

    as
    1. Murphy, Kevin J., 2013. "Executive Compensation: Where We Are, and How We Got There," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, volume 2, chapter 0, pages 211-356, Elsevier.
    2. Davidson, Robert H., 2022. "Who did it matters: Executive equity compensation and financial reporting fraud," Journal of Accounting and Economics, Elsevier, vol. 73(2).
    3. Bergstresser, Daniel & Philippon, Thomas, 2006. "CEO incentives and earnings management," Journal of Financial Economics, Elsevier, vol. 80(3), pages 511-529, June.
    4. Healy, Paul M., 1985. "The effect of bonus schemes on accounting decisions," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 85-107, April.
    Full references (including those not matched with items on IDEAS)

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    JEL classification:

    • M49 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Other

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