HP’s New CEO Package is a Sweetheart Deal

Carly Fiorina, Hewlett-Packard’s new chief executive, appears to be one of the highest paid chief executives in the world.

It has recently been disclosed by the Palo Alto, California-based computer manufacturer that Fiorina, who took the job in July, has been rewarded with a compensation package that is valued at a hefty $80 to $90 million (US$).

However, the element of the package that is ruffling some feathers is a grant for the equivalent of 580,000 restricted HP shares over three years — a block of stock worth $66.1 million when Fiorina took the helm. (US$).

Reward Not Tied to Performance (US$).

What disturbs me about this grant is the fact that it, according to a filing with the Security and Exchanges Commission, is not based on HP’s performance. (US$).

This arrangement is a reversal of HP’s policy as it applied to former CEO Lewis Platt. Part of his compensation was based on the company’s performance, which caused him to lose an earlier stock grant of $2.4 million when HP went through a dry spell earlier this year. (US$).

Some industry observers speculate that HP was forced to give Fiorina such a generous deal to make up for the stock options she lost by leaving Lucent Technologies, Inc., her previous employer. (US$).

Becoming A Trend? (US$).

Just last month, I reported a similar sweetheart deal given to Joseph Galli, Amazon.com, Inc.’s new president and CEO. Amazon is giving Galli two 20-year stock options, which will vest at 10 percent a year at different stages of his employment with the company. They can be exercised at about $113 per share, which was the price of the stock when Galli took the helm. (US$).

The rub is that once Galli is with the company for four years, he will be eligible for a bonus of as much as $20 million — even if Amazon’s stock price is weak. (US$).

I find these golden lifejackets abhorrent, since average stockholders must sink or swim with the current value of a company’s stock. (US$).

Lack Of Accountability (US$).

The fact of the matter is that I don’t blame Fiorina for accepting HP’s offer. I liken what is happening in the highest tiers of corporate America to what has already transpired in professional sports. Most fans sit idly by while owners keep signing pampered ballplayers to multimillion dollar contracts — without performance clauses. Do I blame the players? (US$).

Of course not. If the fans stopped buying tickets, the madness would end. (US$).

Similarly, if stockholders were as outraged as I am about the lack of accountability in corporate compensation packages, they would quickly voice their disdain by buying other companies’ stocks. (US$).

The problem is that both groups suffer from a terminal case of apathy. (US$).

What do you think? Let’s talk about it.

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