Kis, you go to work at Kleiner, and I'll go to work for Amazon.con.
Who'll be a $trillionaire first?
>>Staff Reporter of THE WALL STREET JOURNAL
Amazon.com Inc. is paying its new chief operating officer, Joseph Galli, $5 million in signing bonuses and awarding him options on 1.96 million shares with a likely minimum value of $20 million.
Details of Mr. Galli's employment contract were disclosed in Amazon's latest 10-Q filing with the Securities and Exchange Commission, submitted earlier this month. A close look at the unusually generous package sheds new light on why Amazon was able to land Mr. Galli in the midst of a bidding contest against PepsiCo Inc.'s Frito-Lay unit, which also was trying to sign him for a top job.
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Mr. Galli, 41 years old, built his reputation at Black & Decker Corp., where he oversaw the DeWalt tool unit. He quit earlier this year, frustrated that he wasn't likely to get a shot at the company's top job soon. His dual courtship by Amazon and PepsiCo was the subject of numerous news articles in June.
Amazon traditionally has kept base salaries quite low, preferring to woo managers with big stock and options packages that can yield multimillion-dollar payoffs if Amazon's shares remain strong. Amazon's founder and chief executive officer, Jeffrey Bezos, for example, collected just $81,840 in salary last year. But Mr. Bezos owns about one-third of the company, giving his stock holdings a value of more than $7 billion.
Two-Part Bonus
Mr. Galli's pay to some extent is consistent with Amazon's philosophy. The company said it is paying him a base salary of $200,000 a year, less than half what he earned at Black & Decker. But Amazon also said it will pay Mr. Galli a $3 million bonus on the first anniversary of his service with the company, and a $2 million bonus on the second anniversary.
Amazon also said it is giving Mr. Galli two 20-year stock options, which will vest at 10% a year over different parts of his employment at the company. Those are exercisable at about $113 a share, Amazon's stock price in late June, when Mr. Galli signed on. In Nasdaq Stock Market trading Thursday, Amazon fell $4.3125 to $128.5625.
Amazon also said that if Mr. Galli still works at the company on the fourth anniversary of his starting date, he will qualify for a bonus of as much as $20 million if Amazon's stock price is weak and his options don't have much value on their own.
'The Truly Dark Side'
That provision is "the truly dark side of Mr. Galli's pay package," said Graef Crystal, a long-time critic of what he regards as excessive executive compensation. Mr. Crystal earlier this week analyzed Mr. Galli's contract in his newsletter, the Crystal Report on Executive Compensation. He noted that Amazon's public shareholders don't enjoy any such bonus payments if the stock stumbles.
An Amazon spokesman said the company needed to present Mr. Galli with a pay package that surpassed what PepsiCo was offering.
He added that Amazon could have offered an even larger short-term signing bonus, but felt that the longer-term conditional offer of more cash if the stock is weak would be a more economical way to pay Mr. Galli.<<
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