After surveying the 2010 version of What the Boss Makes, many names jumped out because of the size of their pay.
But there were four that I decided were worthy of special attention:
MOST VALUABLE PLAYER
Reed Hastings, Netflix
I very much wanted to find someone else for this award, primarily because I've gushed a few times over how Hastings is a model of pay for performance. Surely there must be some other fresh face who merits this award.
The one who came closest was Kevin Johnson, the Microsoft refugee who became CEO of Juniper Networks in 2008. During his first two years at the helm, Juniper has generated buzz for eating into the market share of its larger rival, Cisco Systems (CSCO). And in part the credit seems to be due to a sizable increase in spending on research at Sunnyvale-based Juniper.
But after the stock went on a tear for much of last year and early into 2011, Johnson's warning that sales are getting soft has sent shares on a downward skid. That means the jury is still out on a guy whose compensation totaled $10 million in 2010, almost half in salary and cash bonuses.
I also gave Brad Smith, CEO of Intuit (INTU), a close look. The financial software company has seen its stock jump 66 percent since the start of 2010 while earnings and revenues have ticked up. Shareholders are most likely feeling that the $13.9 million pay package Smith received in the past fiscal year, including $11.6 million worth of stock and options, was well earned.
But even so, I just couldn't place Smith or Johnson ahead of Hastings. For one thing, Hastings' pay package was worth a mere $5.5 million in 2010, including about $5 million worth of stock options. In return, the company's stock has risen by about 400 percent since the start of 2010. That means Hastings has created about $10 billion in shareholder value in exchange for a cash salary of about $500,000. That's a bargain by any measure.
And the continued rise in subscribers and the stock price came even as Netflix (NFLX) managed the neat trick of shifting its business model from a delivery-by-mail DVD service to being the leader in streaming movies over the Web.
Among valley CEOs, Hastings was the most valuable player in 2010.
Comeback player of the year
John Kispert, Spansion
Kispert was hired as Spansion's CEO in February 2009 with a clear mandate. The Sunnyvale-based semiconductor company was in financial turmoil and its largest creditors were clamoring for the company to be sold or liquidated. Indeed, when Spansion's board hired Kispert, it offered him a bonus if he could find a buyer or sell its assets.
But Kispert had another idea: Save the company. He cut jobs and pay for those who remained, and filed for bankruptcy, leading to a protracted and brutal fight with creditors. But along the way, Kispert and his executives developed a turnaround plan. And eventually, Kispert's optimism won the day, with the board amending his employment agreement to allow him to collect the bonus if the company emerged from bankruptcy.
Last summer, Spansion did just that and the board rewarded Kispert, who worked on a month-to-month salary during his initial tenure with the company. In 2010, not only did he get a $4.4 million bonus and $865,000 salary, but he got an additional $8.5 million worth of stock and options for a total package of $13.8 million.
Spansion is not entirely out of the woods, but during the most recent quarter, the company beat Wall Street's earnings expectations.
For saving Spansion from a near-death experience and salvaging 3,400 jobs, Kispert is the valley's comeback player of the year.
Rookie of the year
Gary Guthart, CEO of Intuitive Surgical
With its revolutionary robotic surgical system, Intuitive Surgical has been one of the valley's most notable successes over the past decade. Stretching back to 1997, the company has been led by Lonnie Smith, who announced in 2009 that he was stepping aside to become chairman. Not easy shoes to fill.
Fortunately, the company picked another longtime Intuitive executive, Gary Guthart, who moved into the CEO's office in January 2010. Guthart was one of eight new CEOs on the What the Boss Makes list. But with a $5 million pay package that included $4.2 million in stock options, and the company's stellar track record, he faced the greatest expectations. And so far, he's delivered.
The stock wobbled as investors were no doubt skittish about the change at the top. But this week, the stock was trading above $340 a share, close to its peak back in 2008. And during his first year, revenues rose 40 percent while profits increased 64 percent.
It's a solid start that makes Guthart my rookie of the year.
Carol Bartz, Yahoo
It's almost too easy to ding Bartz for the yawning gap between her pay and the company's performance. In her first year, her compensation was valued at $47.2 million, leading one investor research firm to label her the most overpaid CEO in the U.S. for 2009. This past year, the value of her pay package was a more modest $11.9 million, though still enough to make her one of the valley's highest-paid CEOs.
And what did shareholders get for that? The stock has risen from $12.10 a share the day she was named CEO to $14.77 on Thursday, or 22 percent. Not bad, but nowhere near what Microsoft offered to pay for the company before she took over. Meanwhile, revenue has fallen sharply as Bartz sold various assets, struck a search deal with Microsoft, and urged shareholders to be patient.
Dana Lengkeek, a Yahoo (YHOO) representative, noted that Bartz was awarded her $2.2 million cash bonus in 2010 in large part because operating income and earnings per share doubled as she reined in expenses.
"Compensation for our executive officers, including Carol, is determined by the board's compensation committee," Lengkeek said in a statement. "The committee's independent compensation consultants advised the committee with respect to trends in executive compensation, assessment of competitive pay levels and mix, and setting compensation levels, including information regarding competitive CEO pay levels."
But let's look at this another way.
Of her combined $59 million in compensation, $50.8 million has come in the form of restricted stock and options. Those awards vest only if Bartz meets various shareholder value targets, and she can't sell any of it before 2013.
To get her hands on that money, she would have to raise Yahoo's current market value of $19 billion by an additional $32 billion, according to Yahoo's securities filings. Right now, she's basically stuck at home plate, still trying to make contact.
In the next two years, Bartz will have to swing for the fences if she's going to collect that windfall; possible but unlikely. Yes, she's deposited $9 million in cash over two years. But right now, it's hard to imagine that any other valley CEO will leave such a large bounty on the table.
And for that, Bartz gets the nod for biggest compensation strikeout.
MOST VALUABLE PLAYER
Reed Hastings, Netflix He continues to deliver for shareholders, and is one of the Valley's best bargains as CEO. 2010 Stats Cash Compensation: $519,645 Stock compensation: $4,996,988 Total pay: $5,516,633 Gains from options: $18,471,915
ROOKIE OF THE YEAR
Gary Guthart, Intuitive Surgical Taking over for an iconic CEO, he faced high expectations -- and exceeded them. 2010 Stats Cash Compensation: $865,630 Stock compensation: $4,184,963 Total pay: $5,050,593 Gains from options: $5,852,434
COMEBACK PLAYER OF THE YEAR
John Kispert, Spansion He led this company through a near-death experience and has righted the ship. 2010 Stats Cash Compensation: $5,285,116 Stock compensation: $8,583,250 Total pay: $13,868,366 Gains from options: $0
Carol Bartz, Yahoo Given Yahoo's weak performance, she's likely miss her pitch and leave a lot of money on the table. 2010 Stats Cash Compensation: $3,205,365 Stock compensation: $8,741,469 Total pay: $11.946,834 Gains from options: $0
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