‘Star’ CEOs don’t come cheap, Fiorina included
NEW YORK — Like a hot baseball free agent, Carly Fiorina demanded and got a rich pay package when Hewlett-Packard Co. lured her away from Lucent Technologies Inc. in 1999. But she failed to become the corporate equivalent of Roger Clemens.
Her 1999 pay included almost 1.5 million shares of stock, then valued at $65.5 million, plus a $3 million signing bonus. Since then she has piled up millions more. And while HP’s board ousted her Wednesday as chairman, president and chief executive, she won’t be leaving poor: Her severance package is worth at least $21.1 million.
Those who agitate for CEO pay to be linked to performance said they are disgusted by her severance package.
“What would she get if the firm had done well? A country?” asked Jeffrey Sonnenfeld, associate dean of the Yale School of Management.
While her total compensation was nowhere near the heights of Silicon Valley — Apple Computer Inc. CEO Steve Jobs cashed in $74.8 million in options in 2003 and eBay Inc. CEO Meg Whitman took home a total of $42.6 million — HP’s performance hasn’t come close to those companies’ results.
Just look at stock market performance: HP’s stock has been almost flat for two years and is down two-thirds from its 2000 peak, while Apple’s share have quadrupled in the last year and eBay’s are still a high flyer even after a big drop in recent months.
The HP board shoulders much of the blame for both Fiorina’s pay and her failure, according to Paul Hodgson, a senior research associate at the Corporate Library, which monitors corporate governance.
“The board delivered this compensation to her in the beginning, front-loaded, with a massive value not related to performance,” he said. “It has not instituted proper pay systems for her and now finds itself in the position of having to terminate her without cause because, like every other company, they don’t include a ‘poor performance’ clause as reason for termination in their contract.”
“The board has really betrayed the trust of the stockholders,” Hodgson added. “If the board had exercised proper oversight not only of the strategy she was adopting, but also of her compensation, we wouldn’t be in this situation.”
While Fiorina did decline additional retention bonuses the board offered, she still took home $16.8 million in non-stock pay since she joined the company.
At the end of 2003, she had options to buy 3.2 million shares of stock, including a 2003 grant to buy 700,000 shares of HP for $15.75 a share over the next four years. In 2003, the last year for which figures are available, the amount of options given to Fiorina during the year accounted for 1 percent of total options granted to all employees.
The company has helped her with her mortgage, relocation expenses and taxes related to relocating, for a total of $1.6 million between 1999 and the end of 2003.
It also paid for the expense of her personal travel on Hewlett-Packard jets, for security reasons, according to the company. Her retirement pay, which, according to the company’s proxy, will be calculated according to her years of service, will likely be six-figures a year.