At the Trough: CEOs, Already Holding $100 Million-Plus in Equity, Slurping Up More

There are plenty of voices attacking excessive compensation these days, and rightly so. But one element of the gluttony seems particularly anti-shareholder: the CEO, already holding equity valued at more than $100 million, who insists on yet more stock or options (diluting other holders), as if his already-monumental stake isn’t enough to get him out of bed and into the office every morning.

We’re told the goal of well-crafted executive-compensation plans is to align management’s interests with shareholders; and to attract and retain talented managers.

OK. Seems that $100 million of ownership (a figure we settled on arbitrarily, though certainly a smaller sum would suffice for most individuals) of a major company would align one’s interests with holders, no? And an executive, unless he has vast interests elsewhere, would likely want to stick around and do his best to boost his investment, so the $100 million stake alone would seem to encourage retention, eh?

Based on this logic (certainly less squirrelly than most of what one reads in a corporate proxy statement), we needn’t pay the $100 million-holding CEO anything, since protecting his investment ought to motivate him sufficiently.

And yet, Larry Ellison, CEO of Oracle (ORCL), whose equity stake is valued at about $26 billion, stuffed options into his pocket last year valued at about $62 million. That doesn’t make Oracle a bad bet as a stock – YCharts Pro is neutral on Oracle, rating its fundamentals strong and finding it slightly undervalued right now – it just seems a silly way to spend shareholders’ money.

ORCL Stock Chart by YCharts

Who could be more incented that Ellison to lift Oracle’s share price?

Let’s pause to praise three CEOs, however, who forgo all stock and option grants, given their already-substantial holdings. These three are role models:

CEO/Company Value of Equity Holdings 2010 Equity Compensation

Steve Jobs/Apple $1.6 billion -0-

Warren Buffett/Berkshire $46.2 billion -0-

Steve Ballmer/Microsoft $9.4 billion -0-

Also note, the three above took little cash as pay in 2010: Jobs (AAPL): $1; Buffett (BRK.A): $524,946; Ballmer (MSFT): $1.4 million.

What follows is a list, alphabetical and based on Equilar data published in The New York Times April 10, of 29 CEOs (whose companies have filed proxy material already) who do not show the admirable restraint of the three gentlemen above.

CEO/Company Value of Equity Holdings 2010 Equity Compensation

Daniel Amos/Aflac $377 million $10.2 million

J. Cracchiolo/Ameriprise $102 million $5.7 million

R. Fairbank/Capital One $133 million $14.8 million

Micky Arison/Carnival $7.5 billion $3.5 million

John Chambers/Cisco $113 million $13.9 million

B. Roberts/Comcast $446 million $11.2 million

J. Mulva/ConocoPhillips $467 million $11.8 million

James Sinegal/Costco $138 million $2.9 million

T. Ryan/CVS Caremark $162 million $11.5 million

H. Levine/Family Dollar $417 million $2.6 million

Fred Smith/FedEx $1.7 billion $5.1 million

Alan Mulally/Ford $256 million $15 million

John Martin/Gilead Sciences $205 million $10.6 million

Lloyd Blankfein/Goldman $408 million $7.7 million

John Hess/Hess $2.7 billion $8.4 million

David Cote/Honeywell $136 million $8.5 million

Sam Palmisano/IBM $144 million $13.3 million

James Tisch/Loews $589 million $1.3 million

J.W. Marriott Jr./Marriott $2.1 billion $5.8 million

Rupert Murdoch/News Corp $4.5 billion $4 million

Blake Nordstrom/Nordstrom $100 million $1.4 million

Ray Irani/Occidental Pet. $846 million $40.3 million

Larry Ellison/Oracle $26.3 billion $61.9 million

Mark Pigott/Paccar $316 million $1.8 million

Roger Penske/Penske $557 million $2.9 million

L. Camilleri/Phil.Morris Intl $118 million $10.6 million

Paul Jacobs/Qualcomm $108 million $12.4 million

Andrew Gold/Schlumberger $251 million $8.9 million

Howard Schultz/Starbucks $686 million $16.7 million

Having your name on the door, being the founder (or descendent of) or the executive who built the company nearly from scratch would seem to call out for restraint, yet Hess (HES), Marriott (MAR) and Penske (PAG) keep loading up; as do FedEx’s (FDX) Smith, Starbucks’ (SBUX) Schultz and others.



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