Bill - I asked a CPQ friend about this - 'why would CPQ have issued a lot of incentive shares' - he said that CPQ had completely reworked their compensation and bonus scheme in 1Q98 to reflect a new focus on customers and stock price, that the stock incentive plan, which had previously been reserved for upper management (directors and above) had been extended down to the front line managers so lots more people now get bonus incentives of stock options. This policy was effective March 1 and a lot of incentives were given to lower level people at that time. Since CPQ has thousands of middle managers this meant that even if the individual grants were small (500 or 1000 shares with 5 year vesting) the total would be large.
Some pretty interesting info on the other changes to the bonus plan. Apparently anyone who might deal with a customer has about half of their bonus tied to a measure of customer satisfaction done by some outside agency, CPQ is currently behind Dell and HWP, about even with IBM, the goal is to be #1 in customer satisfaction by this time next year. If they get 'into the top tier' (even with the current leaders Dell and HWP) they get some bonus, more if they get better than the leaders.
Manufacturing people have the same customer sat bonus (if the products are not well made, how can customers be satisfied) and also another one tied to measures of 'out of box' quality.
So the incentives are really benefiting a much broader range of employees. the old plan applied to less than 500 people in the company, the new one applies to over 5000 (and the mfg bonus plan which is cash bonus applies to more than 20,000 people) so lots more CPQ people will care about doing things that improve stock price (since they own options) and even more will care about customer satisfaction (since that is how they get cash bonus). That's all the detail I have but it seems like a pretty smart idea to me.
As I said before, there may be some justification for a shareholder's lawsuit but the one that has been started ain't it, since there was no significant difference in channel stuffing last year than in previous years. The insider selling was mostly Tandem executives selling Tandem stock that got changed to CPQ stock (they probably had been sitting on that Tandem stock for a looooong time) and not so much the people who could affect company policy. |
