The pay and incentives packages for top IT executives are way out of line with their value to the company, according to a new report.
In its 2010 Pay Dirt Report, corporate finance research firm Glass Lewis highlighted a number of IT company executives in the bottom 25 of its pay-for-performance scale and singled out Oracle for offering massive share options.
“Was there even a global recession and financial crisis these past two years? Judging by many executives’ pay packages, it is hard to tell,” the report said.
Was there even a global recession and financial crisis these past two years? Judging by many executives’ pay packages, it is hard to tell
"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."
Some of the companies that Glass Lewis’ model identified as having the worst pay-for-performance scores for 2009 included Micron Technology, Yahoo and Sprint Nextel.
Money for success
Glass Lewis weighs up the total value of remuneration packages compared with the success - or otherwise - of a company to estimate executives' value.
Ronald Hovespian of Novell, for example was the lowest-paid CEO on the 25 Overpaid list, receiving a paltry $5.2 million in total compensation last year.
Although the pay level is considered “quite reasonable” compared to other executives, it came during a year in which Novell's stock dropped 12% and the company reported a negative return on equity of 21%.
The situation was similar at Flash manufacturer Micron Technology. Glass Lewis said performance had steadily deteriorated during the past three years, culminating in a $1.8 billion loss in 2009 and a negative return on equity of 34%.
The company saw its net sales decline by $1 billion in 2009, but the total compensation of executives continued to soar.
According to Glass Lewis, the top five Micron executives received $19.5 million in 2009, dwarfing the $10.5 million they received in 2007, when the company’s annual net loss was one-sixth of the 2009 loss.
“We find it somewhat baffling that so many boards and compensation committees have not adjusted compensation programs over the past year,” said Glass Lewis.
We find it somewhat baffling that so many boards and compensation committees have not adjusted compensation programs over the past year
The highest-paid CEO at an Overpaid 25 company was Carol Bartz, who joined Yahoo in January 2009 and received approximately $39 million for the year.
Not all tech companies are flashing the cash, however, and Apple and Amazon both stand out as getting good deals from their top dogs.
Steve Jobs picked up his customary $1 pay for the year and took nothing else from Apple, while Jeff Bezos of Amazon.com received $81,840 in base salary and $1.7 million in other payments. Both own a large amount of shares in their respective firms, however.
Outside the lists for poor performance, there were other eye-watering packages, particularly at Oracle. CEO, Larry Ellison, founder and CEO of Oracle trousered approximately $61 million in annual compensation, while president Safra Catz received some $42.1 million.