8 CEOs Who Won the Stock-Options Lottery

As stock prices tumbled in 2008-09, companies made huge options grants to their top execs, who then scored millions when the market recovered. See who's up $75 million.

It's no surprise anymore that CEOs get lavish bonuses -- even when shareholders lose money or when CEO pay is supposedly declining at least a little.

The highest-paid CEOs

Turns out, based on the latest numbers compiled by the pay experts at The Corporate Library, a corporate governance research company, just eight lucky CEOs in a stock-option-based Great Recession lottery had shared a quarter-billion-dollar profit as of Aug. 4. That was an average of $31.6 million each, in addition to their regular pay and perks.Click graphic to see interactive chartSirius XM Radio The biggest winner? Sirius XM Radio (SIRI, news, msgs) CEO Mel Karmazin, who was up more than $75 million on a huge grant of 120 million options he got in June 2009 as Sirius stock traded down to just 43 cents. The stock recently went for $1.06.

He was followed by Ford Motor (F, news, msgs) CEO Alan Mulally and Starbucks (SBUX, news, msgs) CEO Howard Schultz, up $55.7 million and $44.9 million, respectively. Oracle (ORCL, news, msgs) CEO Larry Ellison took fourth place, up $26.3 million on Great Recession stock grants. (The Corporate Library's list of eight appears below.)

Here's how this CEO pay bonanza works. Stock down? Have a bunch more As the credit crunch tanked the markets during 2008 and early 2009, almost 200 companies shifted into overdrive on stock options awards. They handed out grants to top executives at a pace that far exceeded anything we've seen in recent history. Stockholders might have found that an interesting priority, given that all those options tended to dilute earnings and hold down stock prices.

When the market rebounded, most stocks went with it, and these CEOs made out like bandits.Msn.Video.createWidget('PlayerAd1Container', 'PlayerAd', 300, 213, {"configCsid": "MSNmoney", "configName": "player-money-articles-16x9", "player.vcq": "videoByUuids.aspx?uuids=a4a26720-d4f0-4395-9558-b863fa1359c4,acc6cbe4-3c40-4c01-a6b0-e8e659bf8a72,d8cced93-eaa7-433a-b8ac-f1c0cd625d79,a5194134-46bf-496c-b193-253685455064,f9eb7594-3c65-4619-82f8-25bcfd51e22f,8cfc4ed2-b94c-4846-a7cc-d2ef4bdd5c7e,f433b9e2-561c-4eb3-a071-bda701e48e49,7fc94d89-988e-41f0-9add-f0e91bc2a3c4,d4633ff9-274e-4ad8-91e3-8187b9ad9246,39ef1ab0-eacd-43b1-9a8d-46bb05b70a69,6ad624cc-f96e-471b-9568-1b4c291325ac", "player.fr": "iv2_en-us_money_article_16x9-Investing-CompanyFocus"}, 'PlayerAd1');Msn.Video.createWidget('Gallery4Container', 'Gallery', 304, 150, {"configCsid": "MSNmoney", "configName": "gallery-money-articles", "gallery.linkbackLocation": "bottom_left", "gallery.numColsGrid": "3", "gallery.categoryRequests": "videoByUuids.aspx?uuids=a4a26720-d4f0-4395-9558-b863fa1359c4,acc6cbe4-3c40-4c01-a6b0-e8e659bf8a72,d8cced93-eaa7-433a-b8ac-f1c0cd625d79,a5194134-46bf-496c-b193-253685455064,f9eb7594-3c65-4619-82f8-25bcfd51e22f,8cfc4ed2-b94c-4846-a7cc-d2ef4bdd5c7e,f433b9e2-561c-4eb3-a071-bda701e48e49,7fc94d89-988e-41f0-9add-f0e91bc2a3c4,d4633ff9-274e-4ad8-91e3-8187b9ad9246,39ef1ab0-eacd-43b1-9a8d-46bb05b70a69,6ad624cc-f96e-471b-9568-1b4c291325ac;videoByTag.aspx%3Ftag%3Dmoney_dispatch%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1;videoByTag.aspx%3Ftag%3Dbest%2520of%2520money%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1"}, 'Gallery4');Pay experts suggest companies instead might have considered that they were issuing new options near longtime lows during a crisis and adjusted the number of grants downward.

"It seems that it is always upside for the CEO, and there is never an adjustment made so that they suffer in the slightest," says Greg Ruel, one of the authors of the Corporate Library study, called the 2010 Mega-Grants Survey.

All the execs in the Corporate Library study are based in the U.S., where, by the way, CEOs already made far more than their European counterparts for the same work, even without these options bonanzas.

My earlier column included three CEOs who also made The Corporate Library's list of the eight biggest winners, including Ford's Mulally at No. 2. Here's a look at the three other members who make up the top four.A Sirius-ly big score By far, Karmazin, of Sirius XM Radio, came out on top in the list of Great Recession options winners. Thanks to the timing of that 120 million-option grant on June 30, 2009, Karmazin got an extremely favorable exercise price of just 43 cents. (Options give recipients the right to buy stock in the future at prices set when the options are issued.)

Karmazin was up as much as $96 million at the stock's recent peak in May, though that's slid now to a mere $75.6 million.

Sorry about that, Mel. But in a media world where the rank and file suffered big layoffs in the recession -- and as Sirius has laid off many since its merger with XM Radio -- you've managed to make a bundle.

Karmazin's fans might argue he is worth all this money because he's orchestrating what looks like a successful turnaround -- the main reason I bought Sirius stock a few months ago. In early August, Sirius XM Radio announced 16% revenue growth and a sharp gain in subscribers. Plus Karmazin is paying down debt, which has been a big concern among investors.

But with the stock down from the $5 range when he took over, investors have suffered hefty losses on Karmazin's watch. His giant grant spared him some of that pain, replacing a 2004 grant of 30 million options with an exercise price of $4.72 a share -- basically worthless due to those stock losses.

Worth it or not, Karmazin doesn't have to do anything to collect all that loot, thanks to some twists in his option contract.

The Sirius board failed to put any performance metrics into the four-year vesting schedule for his options. In other words, if Sirius stock just follows the market up as the economy recovers, he will get to cash in all those options within four years.

And if he leaves the company and someone else does a great job in his shoes, Karmazin will still reap rewards. That's because, unlike most employees, Karmazin keeps all those his options even if he leaves the company during that period, unless he's fired for serious misconduct.

Continued: Mega-Starbucks grants More from MSN Money

3-D IPO and other hot new stocks

Is your smart phone spying on you?

5 huge CEO paydays

Why are CEOs so cocky these days?

Why are the rich still whining?

 1 | 2 | 3 | next >

Rate this Article Click on one of the stars below to rate this article from 1 (lowest) to 5 (highest). LowThank you for rating.UGR('ratCntrl')High var avgRating=0;avgRating=6.564103; if(avgRating!=0){avgRating=avgRating/2;avgRating=Math.round(avgRating*100)/100;var sDisplayText="Average rating: " + avgRating + " from ";var usersCount=78;sDisplayText = sDisplayText + usersCount;if (usersCount==1)sDisplayText=sDisplayText + " user";else sDisplayText=sDisplayText + " users";avgRatingElem=document.getElementById("averageRating");avgRatingElem.innerText=sDisplayText;} View all top-rated articlesE-mail us your comments on this article Discuss in a message board MSN Money InsightNew Investor CenterMarket DispatchesJubak's JournalTop Stocks blogCompany FocusContrarian ChroniclesSmart Spending blogFast AnswersDecision CentersStart InvestingMutual FundsFind Hot StocksSimple StrategiesPower ToolsInvesting for IncomeReal Estate InvestingRecent Articles by Michael Brush3-D IPO and other hot new stocks 08/03/2010Is your smart phone spying on you? 07/27/2010What's Facebook really worth? 07/20/2010More . . .Stocks To WatchCareFusionMacy'sNT Global AdvisorsReady MixHSW InternationalCraft Brewers AllianceGrupo TMMVocalTec CommunicationsFund data provided by Morningstar, Inc. © 2009. All rights reserved.StockScouter data provided by Gradient Analytics, Inc.Quotes supplied by Interactive Data.MSN Money's editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor's best course of action must be based on individual circumstances.Msn.Video.createWidget('Gallery8Container', 'Gallery', 500, 230, {"configCsid": "MSNmoney", "configName": "gallery-money-article-site-wide"}, 'Gallery8');msft.msn._ic.cid='4tqeyehq6c9tx0dd8gkc6kb03i2gcute';msft.msn._ic.pst=false;msft.msn._ic.pgn=1; Join the discussion!Add a commentShow commentsSort by:Newest firstOldest first_uc2f12('iucGo');1 - 1 of 1PreviousNextBill in Omaha #1Wednesday, August 11, 2010 7:24:33 AMWhy weren't these options made with deferred vesting, such as about 10% vested each year?  That would possibly ensure that the executives in question would continue to work for the betterment of the companies, since it would have a direct effect on their FUTURE income as well as the current!ReplyReport Abuse1 - 1 of 1PreviousNext_ucf13('0'); _iuc2Om1('MSNPortalInlineComments','Initial_Load_Comment_View','http://articles.moneycentral.msn.com/Investing/CompanyFocus/8-ceos-total-windfall-250-million-dollars.aspx?','en-us');Are you sure you want to delete this comment?Report AbusePlease help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease notify us using the Report abuse form below. We will investigate your report and take appropriate action against offenders. We report all illegal activity to authorities.CategoriesSpam or advertisingChild pornography or exploitationProfanity, vulgarity or obscenityCopyright infringementHarassment or threatOtherAdditional comments(optional)100 character limit To add a comment, pleasesign in/*MSN PrivacyLegalAdvertiseRSSHelpFeedbackSite mapAbout our ads© 2010 Microsoft/*

"It seems that it is always upside for the CEO, and there is never an adjustment made so that they suffer in the slightest," says Greg Ruel, one of the authors of the Corporate Library study, called the 2010 Mega-Grants Survey.

All the execs in the Corporate Library study are based in the U.S., where, by the way, CEOs already made far more than their European counterparts for the same work, even without these options bonanzas.

My earlier column included three CEOs who also made The Corporate Library's list of the eight biggest winners, including Ford's Mulally at No. 2. Here's a look at the three other members who make up the top four.A Sirius-ly big score By far, Karmazin, of Sirius XM Radio, came out on top in the list of Great Recession options winners. Thanks to the timing of that 120 million-option grant on June 30, 2009, Karmazin got an extremely favorable exercise price of just 43 cents. (Options give recipients the right to buy stock in the future at prices set when the options are issued.)

Karmazin was up as much as $96 million at the stock's recent peak in May, though that's slid now to a mere $75.6 million.

Sorry about that, Mel. But in a media world where the rank and file suffered big layoffs in the recession -- and as Sirius has laid off many since its merger with XM Radio -- you've managed to make a bundle.

Karmazin's fans might argue he is worth all this money because he's orchestrating what looks like a successful turnaround -- the main reason I bought Sirius stock a few months ago. In early August, Sirius XM Radio announced 16% revenue growth and a sharp gain in subscribers. Plus Karmazin is paying down debt, which has been a big concern among investors.

But with the stock down from the $5 range when he took over, investors have suffered hefty losses on Karmazin's watch. His giant grant spared him some of that pain, replacing a 2004 grant of 30 million options with an exercise price of $4.72 a share -- basically worthless due to those stock losses.

Worth it or not, Karmazin doesn't have to do anything to collect all that loot, thanks to some twists in his option contract.

The Sirius board failed to put any performance metrics into the four-year vesting schedule for his options. In other words, if Sirius stock just follows the market up as the economy recovers, he will get to cash in all those options within four years.

And if he leaves the company and someone else does a great job in his shoes, Karmazin will still reap rewards. That's because, unlike most employees, Karmazin keeps all those his options even if he leaves the company during that period, unless he's fired for serious misconduct.

Continued: Mega-Starbucks grants More from MSN Money

 1 | 2 | 3 | next >

Read Full Article »