blatantninja
Resident Redneck Facist
Hey, we just had a PERFECT example of what is wrong with executives at big companies: Apotheker at HP.
Before he was fired he had already taken home most of his $1.2 million annual salary, a $4 million signing bonus and an additional $4.6 million awarded for relocation assistance and to offset payments that he forfeited from his previous employer, SAP (SAP).
Apotheker will receive $7.2 million in severance, which will be paid out over the next 18 months. He'll also receive a bonus of $2.4 million for his 11 months of service.
Also, HP will pay Apotheker up to $300,000 for any losses or fees on the sale of his California home, and will immediately vest 156,000 shares of stock valued at $3.6 million on the day Apotheker got the boot.
Holy crap! *I* would have gladly driven HP into the ground for half that approx. $24 million.
It's definitely painful to see, but you have to see it for more than just 'he got $24 million to drive HP into the ground in less than a year." Not saying I completely agree with it, I don't, but:
1) He was there less than a year, he made some decisions that were ultimately unpopular, but he wasn't there long enough to do most of the damage HP has suffered.
2) They hired him away from SAP. Most of that $4.6MM was paying for his deferred comp that he forfeited when he left. Regardless of what he did or did not do at HP, it would be pretty unfair to deny him that given that he could have just road it out at SAP and collected it. HP made him a promise to get him and they honored it.
3) HP is a multi-billion dollar company. $24MM isn't proportionally outrageous to the amount of revenue they generate. (Hard to talk profit given the current state of things).
4) What's the alternative? The price to get a top CEO is high. Yes, they could offer someone $100,000 and lots of good feelings, but who would take the job? To pay that much for a CEO is still no guarantee that it will work out, but to pay them $100k (or similar) is pretty much a guarantee of getting someone that is not qualified.
I'm not saying that executive compensation doesn't need reforms, it does, but there really aren't any good answers that I've seen. Stock options were supposed to be the big cure to executives that didn't have their compensation aligned with performance. Well that failed as it led to massive accounting scandals plus given that fundamentals haven't driven the stock market for about 15 years, it wasn't very well correlated to performance anyway.
The next time I see an executive compensation plan that truly aligns the compensation of a CEO to the long term performance of the company will be a first.