E*Trade Chief Accepts a Cut in Compensation
By DAVID LEONHARDT
esponding to criticism from investors, the chief executive of the E*Trade Group said yesterday that he would forfeit about $21 million of his pay from 2001 and accept no base salary for the next two years.
E*Trade, the online brokerage, upset many investors when it disclosed last week that its boss, Christos M. Cotsakos, had received a large raise last year, making about $80 million, even as the company lost money. Its shares have fallen about 18 percent, to $6.12, since the April 30 disclosure.
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"We heard an enormous amount of shareholder concern," Mr. Cotsakos said in an interview late yesterday. "We said, `Let's give some of this back to show my commitment' " to the company.
But Mr. Cotsakos, who is also E*Trade's chairman, said he did not plan to change the makeup of the board's compensation committee, which corporate governance experts say has as many conflicts as any other company they know. All three members of the committee help run companies that do business with E*Trade or own a large piece of it.
"It's really unthinkable that a company would allow a compensation committee with so many apparent conflicts," said Nell Minow, co-founder of the Corporate Library, a research group in Washington that follows boards.
For the last decade, since the Securities and Exchange Commission began requiring companies to list the ties between directors and executives, most compensation committees have become more independent, she said.
Even after returning $6 million in cash and $15 million in stock, Mr. Cotsakos will have received $60 million last year, more than most chief executives at much larger Wall Street brokerage houses.
Still, his decision to react to the complaints of shareholders was a rare act of contrition at a time when outcries over executive pay have grown common. Pay for the typical chief executive rose to $9 million last year, according to Pearl Meyer & Partners, a consulting firm in New York.
Pay has continued to rise at most companies over the last two years even as profits have plummeted and most stocks have dropped. Investors have been particularly bothered by the windfalls that departing executives at Enron, Ford, Mattel and other companies have received, despite the companies' struggles.
Compared with many of his peers, Mr. Cotsakos received relatively modest pay in 1999 and 2000. In each year, he received about $2 million in cash and no stock. In 2000, he received 2.5 million stock options, which give him the right to buy that many E*Trade shares at a fixed price in the future and profit if the stock rises.
Since joining the company in 1996, he also sold $30.4 million worth of E*Trade shares, but has spent far more money buying shares that he still holds, according to Thomson Financial, a research firm that tracks company filings with the Securities and Exchange Commission. He owns 12.3 million shares, according to the company's most recent filing.
Last year, however, as E*Trade's shares fell to less than $10 from a peak of almost $60 in 1999, the board gave him one of the biggest pay packages in corporate America. It initially paid him an $800,000 salary, a $4.1 million bonus, $29.3 million in stock, $9.9 million in retirement money, $15 million to forgive a company loan and $17.6 million to make up for the taxes he owed on the stock and forgiven loan. It also gave him 1.3 million new stock options.
Mr. Cotsakos said yesterday that a contract he signed in 1996 determined most of his 2001 pay and that the forgiven loan and restricted stock had been one-time payments that should be considered a reward for his entire tenure. Under a new two-year contract, which Mr. Cotsakos said he planned to sign last night, he would receive no base salary or restricted stock and less severance pay in the event he is fired or E*Trade is taken over.
The compensation committee will decide how many options he will receive, he said. His pay for the next two years, Mr. Cotsakos said, "is all tied to performance."
"When the company gains," he said, "the shareholders gain, and I gain." |
