(cont) Semi, (on IHUB) and Thread, If such a movement is initiated in startup-land, it could spread to the smaller F1000 public companies, and up from there. Large companies tend to copy small companies, so starting such a trend at the startup level could be the way to influence change across the board. Do we want to start such a trend?
Semi, the other way to fix it, is what you suggested. I think it's important that people want more stock, that's actually a good thing, but boards need to figure out when to push back sometimes. And if they don't, maybe employees and investors should take matters into their own hands?
But I'm in 100% agreement with the refresh Intel did in December, because (pure mathematics) the stock was underwater. The evidence was very solid that they needed to do it. I'm in complete agreement with it.
However, I am against the # of shares in Intel's most recent grants, to both executives and employees, on the basis that the issuing of such a large increase in # of shares as a reward for a stock drop of 37% YOY, is incongruent to investors needs. I've talked to some people about this, and folks tend to agree with me, that it's strange to reward for a drop in stock price. What am I missing?
I mean, why not drive the price to $1.00 on grant, to get 16X's more # of shares? This methodology is flawed and should be fixed. It's not acceptable to me, to reward execs/employees, for a stock drop of 37% YOY.
But the way to fix this issue, isn't by expensing stock options, since those are already counted for in the dilution. Like the Inquirer said, the issue is the # of shares in the face of a 37% decrease in stock price, (not expensing.)
Intel did a refresh to get the stock out of underwaters (which was absolutely necessary), then Intel needs to lighten up on the way down on actual # of shares on last month's grants, otherwise the comp package for execs and employees isn't a mirror image - the ride down essentially creates a better comp package than the bubble ride up.
I think the doubling up on the shares on the way down appears incongruent to investors. Since Intel is the 3rd most ethical company, then they should get in the driver's seat and fix this industry issue, and take the lead. ( But not by expensing options. )
On another topic, when it comes to CEO compensation, Intel is actually the least offender. The average CEO gets $15M / year - sometimes in cash, which is a no risk vehicle. You can get $6M just to sign in, and $6M just to sign out. Of course, Boards should tell those types to go jump.
Barrett didn't get a refresh in Dec. But he got 350k shares (normally I think he gets something like 200 shares, but the huge drop in stock price, created a doubling of # of shares to 350k, which I am against). However, in fairness to him, INTC would have to reach $42 in one year, in order for the 350k shares to reach $15M. So, one could argue and say, compared to other CEO's, his package is light. OTOH, one could also argue he already owns 5M shares, so INTC only has to grow a measly $3 for this to reach $21 (21-18/18) to translate into $15M. As an investor, I don't think anyone should get $15M for a $3 increase in stock price.
But the problem isn't him, it's the industry. I think it's our "industry surveys" and compensation comparison studies from the so-called compensation experts who (I tend to believe, after talking to about 10 ceo compensation experts from various firms last year in the Valley) they seem to get awed by executives. I don't have this problem, no matter how truly superb an executive is. Is that why they never push back? ... and then they say, "surveys show"... Someone needs to tell our Valley's compensation experts their surveys are wrong since they represent the past, not the future. Things are going to change around here in the Valley. Surveys follow, they don't lead. Lead the change, don't follow it.
So, a comp package that's, "in the range of a survey," doesn't cut it for me - Intel should be driving change in this dimension - it's probably going to come anyway, and if Intel doesn't lead the change, a change has the risk of coming in the format of expensing stock options which would be destructive to hurting the fuel for high-tech growth. You can sense change is coming, so they should lead it. But comp surveys are not vehicles of change, they support status quo. They are a tool I do not want to hear about again, until after change is made. Tell me about the average, after a new and correct average is created. Times have changed.
If there is a shortage of execs - isn't that what L1 is for?
Since Intel is the 3rd best ethical company, they should be driving change - maybe get some diversity on the board with respect to age/wealth, more of a mix, a John Fowler type up there. Boards across the USA are way too undiverse in age/wealth/etc, so they really run the risk of driving blind to such diversity issues, or not anticipating/getting it, which I would characterize CEO compensation as a wealth diversity issue. Maybe things have gotten a bit loose since Gordon Moore isn't on the board, though I think Grove is pretty frugal minded. Usually founders have an eye on cost, like no one else, but more importantly, they have the intuitive sense on both the employees and investors.
On another note, I'm impressed the Board members continued on, because they have taken a lot of flack I would bet, from all direction. These are hard times. Good people don't run from hard problems. They didn't run from a hard problem, which is impressive.
Regards,
Amy J |
