February 12, 2001
Compaq's CEO Got a Big Bonus,
Raise After He Became Chairman
By GARY MCWILLIAMS
Staff Reporter of THE WALL STREET JOURNAL
HOUSTON -- Compaq Computer Corp. Chief Executive Michael D.
Capellas received a three-year contract that more than doubled his pay
after he became chairman last fall, according to a Securities and Exchange
Commission filing.
Last September, Mr. Capellas became chairman
and CEO following the retirement of former
chairman Benjamin M. Rosen. Two weeks later,
he received an $850,000 one-time bonus, base
pay of at least $1.6 million a year and annual
bonus of as much as twice his base pay.
The contract was disclosed late Friday as part of
the company's annual report filed with the SEC.
The contract also calls for performance-based
stock options and incentive awards that are
targeted to a range of seven to 10 times his $1.6
million salary.
Directors described the higher pay as compensation for taking on the
chairman's title and to guarantee Mr. Capellas the "financial security to
focus" on Compaq. In 1999, Mr. Capellas was paid an annual salary of
$850,000 and received a $1 million bonus plus stock options.
Under Mr. Capellas, Compaq's operating
income last year more than tripled to $1.7
billion. Including a $1.8 billion charge for
write-down of investments, net profit last year was unchanged at $569
million.
As part of the new contract, Mr. Capellas received options for nearly a
million shares of Compaq stock. About half the options vest at various
dates based on Mr. Capellas's continued employment through 2004. The
remainder can vest according to a schedule of stock-price targets or if
increases in earnings per share match or exceed those of major rivals.
In an incentive to raise the company's stock price, 250,000 of the share
options can vest if shares stay for 15 days above a stair-stepped schedule
of stock-price targets. The targets range from $35 a share to $55 a share.
(As of 4 p.m. Friday, in New York Stock Exchange composite trading,
Compaq shares fell 91 cents to $22.50.) Another 250,000 shares can vest
if the increase in Compaq's earnings per share matches or exceeds the
average increase of rivals Dell Computer Corp., Hewlett-Packard Co. and
International Business Machines Corp. over specified time periods.
Write to Gary McWilliams at gary.mcwilliams@wsj.com |
