When ranked by total pay in 2014, Microsoft CEO Satya Nadella didn’t just come in first among 113 public-company CEOs in Washington, Oregon and Idaho.
He also lapped them.
Microsoft’s board of directors last year awarded its new CEO a compensation package that added up to $84.3 million in stock, cash and benefits, according to the company’s proxy filing.
1 SATYA NADELLA
MICROSOFT
2014 total pay: $84.3 million
Cash pay: $4.5 million
Equity pay: $79.7 million
Market cap (12/31): $387.1 billion
Profit FY 2014: $22 billion
Number of employees: 128,000
Nadella’s reported compensation package was nearly four times larger than the Northwest’s second-highest-paid public company CEO, Howard Schultz of Starbucks. The value of Nadella’s package even exceeded the individual annual sales for 21 Northwest public companies during fiscal year 2014.
But Nadella’s reported 2014 pay is also overstated because of accounting and disclosure requirements.
Nearly 95 percent of Nadella’s compensation consisted of stock valued at $79.7 million, and he won’t be eligible for his first stock payout for five years, disclosure filings show. Also, whether Nadella gets the full payout will depend on his ability to get the company to hit various performance targets.
Microsoft’s board opted for the phased-in stock award because, as a large shareholder, Nadella would benefit, along with investors, from the company’s long-term success.
Nadella’s two predecessors, co-founder Bill Gates and Steve Ballmer, were also among Microsoft’s largest shareholders when they ran the company.
Microsoft’s pay package illustrates the complexity and nuance of executive compensation, as well as the heightened transparency of executive pay at public companies because of federal regulations.
Nadella’s example also underscores how CEOs are paid differently from other workers, with much of their compensation coming as stock in the company.
Putting a value on stock awards is always a challenge. Corporate boards increasingly peg stock awards to whether the company hits performance targets under the CEO’s watch.
Also, nobody can predict the market value of the stock when executives exercise their payouts, often years in the future.
2 HOWARD SCHULTZ
STARBUCKS
2014 total pay: $21.4 million
Cash pay: $4.4 million
Equity pay: $16.5 million
Market cap (12/31): $61.5 billion
Profit FY 2014: $2 billion
Number of employees: 191,000
Schultz, the chairman, president and CEO of Starbucks and the region’s second-highest-paid public-company executive, received a 2014 compensation package valued at $21.4 million.
Seventy-seven percent of his compensation consisted of stock and option awards worth an estimated $16.5 million.
3 JOHN LEGERE
T-MOBILE US
2014 total pay: $18.5 million
Cash pay: $7.9 million
Equity pay: $10.6 million
Market cap (12/31): $21.7 billion
Profit FY 2014: $247 million
Number of employees: 45,000
Schultz is a regular on the list of highest-paid, public-company executives in the Northwest. He’s been in the top five every year for the last five years.
No. 3 was John Legere, president and CEO of T-Mobile US. Shares in the company accounted for about 57 percent of his total pay, which added up to $18.5 million.
4 MARK PARKER
NIKE
2014 total pay: $14.6 million
Cash pay: $8 million
Equity pay: $5.9 million
Market cap (12/31): $83 billion
Profit FY 2014:$2.6 billion
Number of employees: 56,500
Another regular of the top five is Mark Parker, president and CEO of Nike. He’s back this year at No. 4, with a total pay package of $14.6 million. About 40 percent of his pay consisted of stock awards.
Coming in at No. 5 was Mark Durcan, CEO of Micron Technology. Nearly 70 percent of his $11.4 million pay package last year was company stock.
5 MARK DURCAN
MICRON TECHNOLOGY
2014 total pay: $11.4 million
Cash pay: $3.4 million
Equity pay: $8 million
Market cap (12/31): $37.6 billion
Profit FY 2014: $3 billion
Number of employees: 30,400
“What people a lot of times forget is that most CEO compensation is predominantly equity based,” said Peter Gleason, president of the National Association of Corporate Directors in Washington, D.C.
More corporate boards in the last 12 years have been paying their CEOs with either time-vested or performance-based stock awards on top of base salaries, research shows.
Among Northwest public companies, 82 percent paid their CEOs with stock in 2014, according to data gathered by Equilar for The Seattle Times.
Thirty-seven percent of the Northwest’s public-company CEOs got the majority of their pay in the form of stock.
The prevalence of stock awards has contributed to rising CEO pay, with the bull market, now 6 years old, driving up the value of awarded shares, Gleason said.
In the last 12 months, shareholders of Micron Technology, Nike and T-Mobile overwhelmingly approved their companies’ executive pay with nonbinding, “say-on-pay” votes.
At Starbucks, 85 percent of the company’s shareholders in March approved of its pay package.
Microsoft investors were not as supportive. In December, 72.6 percent of Microsoft shareholders said they approved of the company’s compensation plan.
A 70 percent “yes” vote would be considered a landslide in a civic election. But among public companies, say-on-pay votes with less than 80 percent approval are cause for concern.
At that point, Gleason said, companies need to reach out to shareholders and find out what’s troubling them.
Source Article from http://www.seattletimes.com/business/stock-awards-on-top-of-pay-bonuses-boost-ceo-compensation/
Stock awards on top of pay, bonuses boost CEO compensation
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