PeopleSoft CEO's just rewards?
Business-software maker PeopleSoft saw the value of its stock tumble by more than 50 percent in 2002, but the company gave CEO Craig Conway a massive pay increase anyway.
Pleasanton, Calif.-based PeopleSoft disclosed Conway's pay package this week in a proxy filing. Conway's cash compensation actually fell 12 percent, to $2.9 million, but his stock-based compensation soared, with the board granting him $14.6 million in restricted stock, up from zero in 2001. The company also granted Conway the option to buy 4.1 million shares, which would be worth $170 million assuming the stock rises 10 percent annually for 10 years. In 2001, the company granted him 1 million stock options.
In addition to poor stock performance last year, PeopleSoft saw sales fall 8 percent and earnings fall 5 percent over the course of the year.
"What the heck does the board...think they're doing in offering this kind of gargantuan pay package at a time when the entire software market is in its steepest decline in over a decade?" asked Marc Lewis, president of executive-recruitment firm Morgan Howard.
Particularly worrisome, said Lewis, is Conway's bundle of restricted stocks, as it essentially allows him to hedge his bets. Although stock options require the company's stock price to rise in order to be of any value, a stock grant is most likely always worth something. So even if Conway is unable to lift the company's shares, he comes out ahead.
In its proxy statement, PeopleSoft said Conway's grants "are intended to maintain Mr. Conway's compensation at a competitive level."
"In awarding these grants, the Compensation Committee considered Mr. Conway's outstanding performance in leading PeopleSoft, the company's performance in 2002 and 2001 and an assessment of equity grants made to CEOs of other companies of similar size in the industry," the proxy states.
A PeopleSoft representative said the company had nothing to say on the subject beyond the information provided in the proxy.