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Oracle, Yahoo and a handful of other tech giants found themselves singled out by research firm Glass Lewis & Co.’s latest “Pay Dirt” report, which details which executives are underpaid or overpaid relative to their companies’ overall performance.
The firm assembled its lists of “Overpaid 25” and “Underpaid 25” companies from the S&P and Russell 3000 indices. Those companies with the worst pay-for-performance ratings for fiscal 2009 ended up on the “Underpaid” list, while the firm’s analysts assembled the “Overpaid” list to “provide examples of companies where pay and performance are tightly aligned.”
The tech companies appearing on the “Overpaid” list included Yahoo, Novell, Sprint Nextel, Motorola, Micron Technology and Clearwire.
“Was there even a global recession and financial crisis these past two years? Judging by many executives’ pay packages, it is hard to tell,” reads the report. “While average CEO pay in the S&P 500 declined in 2009, many executives continued to be paid extravagantly with little to no regard for corporate performance.”
The highest-compensated tech CEO in the “Overpaid” category? Carol Bartz, at Yahoo. The report suggests Bartz “received approximately $39 million in 2009, roughly $25 million of which she received as stock options upon joining the company.” Part of Bartz’s package included a $10 million “make-whole” payment for leaving AutoDesk, which the report cited as an example of compensation with “no real justification.”
The report also claimed Novell CEO Ronald Hovespian as an example of an executive who received payments misaligned with the company’s broader fortunes: “Although this pay level is quite reasonable compared with that of Ms. Bartz, or even with the average CEO pay for the S&P 500 index, Novell’s pay was high relative to performance, earning the company a spot on our Overpaid 25 list due to its severe underperformance compared to peers.”
Sprint Nextel was another company cited for discrepancies between executive pay and overall performance, with the report calling the carrier “a perennial member of our Overpaid 25 list for the S&P 500. … Although Sprint Nextel failed to post a profit for the third straight year, the company paid its top five executives an estimated $26 million, with $10.3 million going to CEO Daniel Hesse.”
But some tech executives managed to place on the report’s “Underpaid” list-most notably, Amazon.com CEO Jeff Bezos and Apple CEO Steve Jobs.
“In 2009, Mr. Bezos received $81,840 in base salary in $1.7 million in the incremental cost of security arrangements. The sole compensation in 2009 for Mr. Jobs was his annual salary of $1.”
Lists of the world’s richest people, such as the annual one assembled by Forbes, regularly name Bezos and Jobs as billionaires because of their existing holdings. For example, Jobs is a substantial stockholder in Disney, helping place his Forbes-calculated net worth at $6.1 billion.
Glass Lewis & Co.’s report noted Oracle as another company offering its executives enormous pay packages: “It is customary for Oracle to grant its top executives massive amounts of stock options with no performance requirements. In 2009, the top five executives collectively received time-vesting options to purchase 20.5 million shares, which we valued at $145 million.”
Oracle’s robust revenues were enough to keep it off the research firm’s “Overpaid” list. However, that didn’t stop the report from calling out the company’s newest executive for his take-home pay: “As of September 6, Oracle now also has the rare distinction of employing two people who simultaneously appear on our list of the highest paid CEOs. Mark Hurd, who is now a president of Oracle, earned the #14 ranking on our list of the highest paid CEOs for the $30.6 million he received from Hewlett-Packard in 2009.”
Hurd’s deal under Oracle gives him a base salary of $950,000, a potential $10 million bonus and a grant of 10 million stock options, with a guarantee to purchase options of 5 million shares annually for the next five years-should he stay employed by the company. The report deems this compensation “exorbitant.”