You may want to have a look at a question discussing the registers in which contractions are considered acceptable first: Using contracted forms {don't / let's} in a formal text and Using of 's, 've and 'd_official or colloquial?.

I'm afraid you're not right. A contracted -'d is not only correct, it's far more likely than the fully-spelled-out equivalent. Contractions are normal in speech, especially with pronoun subjects, and contracted would and had both reduce to /d/, just as contracted is and has both reduce to /z/. There is a special way to write them, with apostrophes, which means that it's officially part of the writing system and is not incorrect. It may be unsuitable for some purposes, but it's definitely correct English.

Here's a list of, apparently, common contractions: en.wikipedia.org/wiki/Wikipedia:List_of_English_contractions‌​. This makes me think that almost anything goes. (something'dn't've)

"In everyday conversation the word would is often slurred and may be shown as 'd following a noun in dialogue, e.g. "John'd be upset if he found out." " books.google.com/…

I'd say you're correct when addressing in a formal register, but it's fine for conversation or less formal texts.

John Lawler is pointing out what's grammatical. Certainly, it's not conventional (see Google Ngrams like these) to write "The manager'd pay high salaries ..." even if it does represent what many might say more faithfully. It would also create an undesirable impression for many readers, especially if used in a formal piece of writing. And might well attract an error mark from many examiners.

Define "acceptable". When is it acceptable to whom? How acceptable? POB.

On ELU, it's a standing joke that 'Colorless green ideas sleep furiously' is totally grammatical. Yet (most would say) totally unacceptable in communication. 'Who is it?' ... 'John and me.' would mark your speech as idiomatic and you as normal, but might lose you a mark to some Dickensian exam board.

@EdwinAshworth: "conventional"? What convention are you referring to? Who sets such a convention? (Google Ngrams?). It's grammatically correct, and it's commonly used in speech. How "acceptable" it might be in written English depends entirely on the context and on who is judging acceptability. I know of no "convention" that is involved here.

@Keep these mind I was really pleased that you'd found a list of 'common' contractions. Then I read it and saw why you'd added 'apparently'.

@EdwinAshworth: Can you back up your claim that most would say that that sentence is "totally unacceptable in communication"? Are we now voting or polling to determine acceptability in communication? How are you measuring "most"? Just how are those "most" judging acceptability in communication (or doesn't that matter)?

@Edwin: I think John is primarily focused on spoken language (that's usually all he really cares about), in which case he's quite correct that there's nothing remotely unusual about reducing would to d in the cited context. It's just that this would usually be a very unlikely contraction in the written form (but obviously not "ungrammatical").

@Drew On instigating a Google search, I was presented with 'No results found for "The manager'd pay" '. I have found 3 results for "The manager'd". I believe that this data strongly supports the claim that "writing manager'd is not in accordance with what is generally done" (the definition of 'conventional' which obviously is intended in my earlier comment here, and which is listed first in most of the dictionaries I've just checked in).

@EdwinAshworth: manager -> you, ngram. Whether that is meaningful, I don't know. And with "go".

@Drew (re your C3) Wikipedia has << "Colorless green ideas sleep furiously" is a sentence composed by Noam Chomsky in his 1957 book Syntactic Structures as an example of a sentence that is grammatically correct, but semantically nonsensical." Are you saying that talking / writing nonsense when claiming to be trying to communicate should not be considered totally unacceptable? Acceptability is determined by what most people accept, and corpus research the way to estimate this.

@EdwinAshworth: Clearly, at least since Chomsky's example, that sentence is both known and meaningful, representing the phenomenon you are referring to. But sure, you can substitute other words for a new example that might be meaningless with no accompanying context. Put in context, in a work of fiction perhaps, nearly any grammatical (and even some ungrammatical) sequence of words can have meaning. Neither ungrammatical nor uncommon implies nonsensical.

With more context we might be able to say that the contraction is "unacceptable". But not with just the context given so far (an English test). With only that context, I don't see how such a judgment can be made, except as POB.

@Drew Can you provide evidence challenging "Writing manager'd is not in accordance with what is generally done" better than Google searches or Ngrams? Better than its lack of inclusion among Wikipedia's 'common contractions'? I've certainly never come across this contraction. // By the way, 54 000 Google hits for "the manager would pay" and 390 000 for "the manager would".

Getting back to the original question. It includes "many students wrote the following: 1) The manager'd". If that is true, then I suspect the OP's own (or the lecturer's before him/her) lecturing might be somewhat idiosyncratic. So, what's going on?

@Keep these mind An unguarded 'We make contractions this way: "He would" becomes "He'd" might be seen as a licence to make similar contractions wherever possible.

Thanks for your comments. Actually I have just taken over this particular class, and I can assure you that I haven't instructed them to use contractions whenever possible. I'm usually "frugal" with contractions and I tend to use the extended form even when speaking. If I had to cast blame on something, it would definitely be the textbook. I've noticed there has been a trend in the latest editions to use abbreviated and contracted forms in rule explanations and exercises as well. I suspect the students have been encouraged to do indiscriminately..