And, of course, a monster-sized paycheck.
Will the new CEO's pay be larger than Amelio's relatively lavish package? "My nose tells me yes," said Claude Johnston, a partner at executive compensation firm Pearl Meyer & Partners.
Nevertheless, executive consultants generally agree that Apple's search for a new chief executive officer and chairman will not be easy. As everyone knows, the company has baggage: growing financial losses, a plunging stock price, and shrinking market share. High-level management has turned over a number of times in the past year. Further, a formula for success has already eluded one high-priced turnaround artist: Amelio himself, who came to Apple only 17 months ago.
"It's a thin-ice game for a CEO because if it goes under his watch, that's what he will be remembered for," said Brian Foley, principal at Brian Foley and Company. "I'd look around at Compaq (CPQ) or Gateway 2000 (GTW) for someone who has been an effective No. 2 or 3." Apple could also possibly look at executives from currently troubled companies such as Silicon Graphics (SGI), he said.
Pearl Meyer's Johnson suggested that IBM's Sam Palmazzano, who helps run that company's PC division, also might be a potential candidate.
But how the market will react to a new chief is a trouble spot for the CEO search team. "Will they see them as a caretaker or a savior?" Foley asked. As a wild card, Apple could gamble on a cost-cutting risk taker, someone like "Chainsaw" Al Dunlap [current Sunbeam CEO and turnaround celebrity], he said. But that solution might not jive with the charisma quotient that Apple and its customers seem to demand from its higher up.
Apple's low stock price and current financial situation only complicates matters--especially in regard to compensation.
"They are not in a position to offer a lot of cash," said Sharon Gurwitz, a vice president at SCA Associates. At the same time, the history of the stock price makes option grants a tough sell. One possibility, she said, would be to give the future CEO a large grant of "preferred price stock options," stock options which can only be exercised at a price higher than current market price. Companies in turnaround situations often grant preferred price options, she said.
In any event, "Severance is going to be an issue. They will want protection on the downside," she said.
All three pointed to Lou Gerstner as the kind of executive Apple needs. A Nabisco executive, Gerstner came to IBM without much computer experience, yet managed to turn the company around. The difference, said Foley, is that Apple's situation seems much more dire.
Amelio came to Apple as the chief executive officer and chairman in February 1996 following the ouster of Michael Spindler and immediately drew fire for his excessive compensation package. The package included guaranteed bonuses, large amounts of stock options, and a loan-lease on his personal plane for $5 million.
In 1996, Amelio's compensation last year came to $655,061 in salary, $2,334,000 in performance bonuses, and $3,830,580 in "performance" shares of stock, according to a corporate spokeswoman. Apple's fiscal 1996 ended in September 1996, right before Apple experienced a disastrous Christmas season. A survey by the San Francisco Chronicle recently found that Amelio was the sixth highest-paid executive based in the San Francisco Bay Area. All of the executives above Amelio on the list, and nearly all of those below, worked at companies with profits.