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Home Watchlists Rankings Markets Topics Sectors Analysis Pro Strategy Economy Upgrade to Pro Market Analysis Center At the Trough: CEOs, Already Holding $100 Million-Plus in Equity, Slurping Up More by Jeff Bailey April 20, 2011There are plenty of voices attacking excessive compensation these days, and rightly so. But one element of the gluttony seems particularly anti-shareholder: the CEO, already holding equity valued at more than $100 million, who insists on yet more stock or options (diluting other holders), as if his already-monumental stake isn't enough to get him out of bed and into the office every morning.
We're told the goal of well-crafted executive-compensation plans is to align management's interests with shareholders; and to attract and retain talented managers.
OK. Seems that $100 million of ownership (a figure we settled on arbitrarily, though certainly a smaller sum would suffice for most individuals) of a major company would align one's interests with holders, no? And an executive, unless he has vast interests elsewhere, would likely want to stick around and do his best to boost his investment, so the $100 million stake alone would seem to encourage retention, eh?
Based on this logic (certainly less squirrelly than most of what one reads in a corporate proxy statement), we needn't pay the $100 million-holding CEO anything, since protecting his investment ought to motivate him sufficiently.
And yet, Larry Ellison, CEO of Oracle (ORCL), whose equity stake is valued at about $26 billion, stuffed options into his pocket last year valued at about $62 million. That doesn't make Oracle a bad bet as a stock "“ YCharts Pro is neutral on Oracle, rating its fundamentals strong and finding it slightly undervalued right now "“ it just seems a silly way to spend shareholders' money.
ORCL Stock Chart by YCharts
Who could be more incented that Ellison to lift Oracle's share price?
Let's pause to praise three CEOs, however, who forgo all stock and option grants, given their already-substantial holdings. These three are role models:
CEO/Company Value of Equity Holdings 2010 Equity Compensation
Steve Jobs/Apple $1.6 billion -0-
Warren Buffett/Berkshire $46.2 billion -0-
Steve Ballmer/Microsoft $9.4 billion -0-
Also note, the three above took little cash as pay in 2010: Jobs (AAPL): $1; Buffett (BRK.A): $524,946; Ballmer (MSFT): $1.4 million.
What follows is a list, alphabetical and based on Equilar data published in The New York Times April 10, of 29 CEOs (whose companies have filed proxy material already) who do not show the admirable restraint of the three gentlemen above.
CEO/Company Value of Equity Holdings 2010 Equity Compensation
Daniel Amos/Aflac $377 million $10.2 million
J. Cracchiolo/Ameriprise $102 million $5.7 million
R. Fairbank/Capital One $133 million $14.8 million
Micky Arison/Carnival $7.5 billion $3.5 million
John Chambers/Cisco $113 million $13.9 million
B. Roberts/Comcast $446 million $11.2 million
J. Mulva/ConocoPhillips $467 million $11.8 million
James Sinegal/Costco $138 million $2.9 million
T. Ryan/CVS Caremark $162 million
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There are plenty of voices attacking excessive compensation these days, and rightly so. But one element of the gluttony seems particularly anti-shareholder: the CEO, already holding equity valued at more than $100 million, who insists on yet more stock or options (diluting other holders), as if his already-monumental stake isn't enough to get him out of bed and into the office every morning.
We're told the goal of well-crafted executive-compensation plans is to align management's interests with shareholders; and to attract and retain talented managers.
OK. Seems that $100 million of ownership (a figure we settled on arbitrarily, though certainly a smaller sum would suffice for most individuals) of a major company would align one's interests with holders, no? And an executive, unless he has vast interests elsewhere, would likely want to stick around and do his best to boost his investment, so the $100 million stake alone would seem to encourage retention, eh?
Based on this logic (certainly less squirrelly than most of what one reads in a corporate proxy statement), we needn't pay the $100 million-holding CEO anything, since protecting his investment ought to motivate him sufficiently.
And yet, Larry Ellison, CEO of Oracle (ORCL), whose equity stake is valued at about $26 billion, stuffed options into his pocket last year valued at about $62 million. That doesn't make Oracle a bad bet as a stock "“ YCharts Pro is neutral on Oracle, rating its fundamentals strong and finding it slightly undervalued right now "“ it just seems a silly way to spend shareholders' money.
ORCL Stock Chart by YCharts
Who could be more incented that Ellison to lift Oracle's share price?
Let's pause to praise three CEOs, however, who forgo all stock and option grants, given their already-substantial holdings. These three are role models:
CEO/Company Value of Equity Holdings 2010 Equity Compensation
Steve Jobs/Apple $1.6 billion -0-
Warren Buffett/Berkshire $46.2 billion -0-
Steve Ballmer/Microsoft $9.4 billion -0-
Also note, the three above took little cash as pay in 2010: Jobs (AAPL): $1; Buffett (BRK.A): $524,946; Ballmer (MSFT): $1.4 million.
What follows is a list, alphabetical and based on Equilar data published in The New York Times April 10, of 29 CEOs (whose companies have filed proxy material already) who do not show the admirable restraint of the three gentlemen above.
CEO/Company Value of Equity Holdings 2010 Equity Compensation
Daniel Amos/Aflac $377 million $10.2 million
J. Cracchiolo/Ameriprise $102 million $5.7 million
R. Fairbank/Capital One $133 million $14.8 million
Micky Arison/Carnival $7.5 billion $3.5 million
John Chambers/Cisco $113 million $13.9 million
B. Roberts/Comcast $446 million $11.2 million
J. Mulva/ConocoPhillips $467 million $11.8 million
James Sinegal/Costco $138 million $2.9 million
T. Ryan/CVS Caremark $162 million $11.5 million
H. Levine/Family Dollar $417 million $2.6 million
Fred Smith/FedEx $1.7 billion $5.1 million
Alan Mulally/Ford $256 million $15 million
John Martin/Gilead Sciences $205 million $10.6 million
Lloyd Blankfein/Goldman $408 million $7.7 million
John Hess/Hess $2.7 billion $8.4 million
David Cote/Honeywell $136 million $8.5 million
Sam Palmisano/IBM $144 million $13.3 million
James Tisch/Loews $589 million $1.3 million
J.W. Marriott Jr./Marriott $2.1 billion $5.8 million
Rupert Murdoch/News Corp $4.5 billion $4 million
Blake Nordstrom/Nordstrom $100 million $1.4 million
Ray Irani/Occidental Pet. $846 million $40.3 million
Larry Ellison/Oracle $26.3 billion $61.9 million
Mark Pigott/Paccar $316 million $1.8 million
Roger Penske/Penske $557 million $2.9 million
L. Camilleri/Phil.Morris Intl $118 million $10.6 million
Paul Jacobs/Qualcomm $108 million $12.4 million
Andrew Gold/Schlumberger $251 million $8.9 million
Howard Schultz/Starbucks $686 million $16.7 million
Having your name on the door, being the founder (or descendent of) or the executive who built the company nearly from scratch would seem to call out for restraint, yet Hess (HES), Marriott (MAR) and Penske (PAG) keep loading up; as do FedEx's (FDX) Smith, Starbucks' (SBUX) Schultz and others.
Jeff Bailey is an editor for the YCharts Pro Investor Service.
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