May 14, 2003

Executive Compensation

I did something today that I've done more often that most people, I suspect. I actually read the "Notice of Annual Meeting of Stockholders" document that was sent to me by my brokerage. As a shareholder of several major corporations, I get these in the mail pretty frequently. I suspect that lot of people do--anyone who directly invests in stocks does.

You can learn some pretty amazing things from these documents (and regular SEC filings). For example, an Executive Vice President at this particular company was paid an annual salary of $500,000 in 2002. And he received a bonus of $562,500. He was awarded 100,000 stock options and brought in $117,112 in "other compensation" in 2002. In that same year, the Company contributed $2,750 to his 401(k) plan and paid a $450 group term life insurance premium.

Not bad! I'm a little surprised he didn't try to max out his 401(k) contribution. The limit was $10,500/year (or something like that) and his company matches a percentage of his contributions. But, hey, that's just me. I'm saving for my retirement on some tropical island.

Anyway, it gets better! In 2002, the Company also paid $113,912 in relocation expenses (that's on top of the $58,943 in relocation expenses for 2001, it says).

He must have had a lot of books to move. I'm pretty sure my relocation was well under the $10,000 limit.

But that's not all. Let's call this mysterious executive "Bob" while I quote from the another section of the document that mentions him.

In March 2001, the Company entered into an agreement with Bob pursuant to which, Bob is entitled to certain reimbursement of relocation expenses, including a mortgage subsidy. In March 2003, the Company entered into a letter agreement with Bob amending the terms of that agreement. Under the terms of the new letter agreement, Bob's base salary for 2003 was reduced to $450,000 and, in lieu of the mortgage subsidy, Bob is entitled to a payment of $23,000 on the first anniversary, $16,000 on the second anniversary and $8,000 upon the third anniversary, of his closing escrow on the purchase of a home in the Bay Area. The payments will be grossed up with respect to taxes payable by Bob and are conditioned upon the continued employment of Bob with the Company.

(Emphasis mine.)

Must be nice. Pulling down roughly half a million dollar is base salary and at least as much in an annual bonus. Why does a guy making that much cash need help paying for a house?

I have no idea. If I had that kind of cash, I'd be quite content to pay for my own place.

What I do know is that this is typical. (Like I said, I read these documents when they come in the mail.) And it's strange at the same time. You see, I don't know how much any of my co-workers are paid. We may be paid the same. Or maybe they make $30,000/year more than me. Or less. And they probably don't know how much I'm paid. It's a taboo subject at work. And I really don't understand why.

But it's trivial to find out how much Bob and the other's at the top are paid.

Update: I checked Bob's Company's 401(k) policy. It turns out that he did maximize his benefits.

Posted by jzawodn at 11:12 PM