Whitman receives $16.5 million performance-based package for 2011, one dollar salary
HP CEO Meg Whitman isn't making out like a bandit as much as her predecessor, but she still has potential to do pretty well for herself as HP's chief executive. She agreed to a salary of one dollar a year, plus bonuses and stock options. With 2012 closed out, HP filed with the SEC their customary forms, including disclosures about how much Whitman and the rest of the executive team were compensated for their time and effort.
For her part, Whitman received her $1.00 paycheck, $372,598 in "other compensation" and stock awards worth* more than $16 million. We put an asterisk on 'worth' for a reason - they're only worth that and only available if Whitman can get HP's stock price up. The stock options are broken into two 800,000 block units, the first vesting on her one-year anniversary as HP CEO (22 September 2012) if HP's shares close above $28.31 for 20 consecutive days. The second block comes due a year later at $33.03 per share. As you can imagine, should Whitman be able to hit those marks, she'll have quite the nice payday as a result. Currently, shares of HPQ are trading around $28.76.
We've always been fans of performance-based compensation here - giving the executives a stake in the company gives them motivation to work extra hard. That said, even though they're practically an industry standard, there's something about tying that to the stock price that doesn't sit well with us. The stock price is a general summation of the company's worth, and that includes metrics like market share and profit. But the stock price is also focused almost exclusively on the short term - on the next quarter. A few good quarters can mask a lot of underlying structural problems in a company. Stock-based compensation is centered around the personal enrichment of the executive as a result of the enrichment of the company.
We suppose that's not a bad thing, so long as the deal is structured competently. What we finally got a glimpse into HP's filings is the result of a bad deal: Leo Apotheker. The ousted HP CEO's 11 month reign of terror included a much criticized $10-billion acquisition, the thought of splitting of HP's profitable PC division, and the closure of webOS hardware development. During his time at HP, Apotheker brought in $1.15 million in salary, a $4 million signing bonus, $2.4 million severance payment, $17 million in stock, $2.9 million in relocation expenses, and $1.7 million in non-competition payments (perhaps HP should have paid Apotheker to go work somewhere else). Yup, Apotheker made nearly $30 million in the course of wrecking HP and slashing its valuation by 40%. Contrast this with Whitman's compensation package and you can see that the HP Board of Directors learned its lesson the hard way.