Executives from Cisco Systems will not receive a bonus in 2001 as a result of the company's lackluster performance in the battered telecom sector.
Cisco CEO John Chambers saw his salary fall to $268,131 in fiscal 2001 from $323,319 the previous year, according to a recent filing with the U.S. Securities and Exchange Commission.
But Chambers received more in stock options. He was awarded 6 million shares in options this year, an increase from 4 million last year, and became the only top officer to pull in more grants this year.
Earlier this year, the company's board also accepted Chambers' request to lower his base salary to $1 a year. That salary change will go into effect for the 2002 fiscal year.
Cisco bases its executive pay on individual and company performance as well as on salaries of executives at Cisco's competitors. Cisco awarded Chambers more in options to attach a significant portion of this compensation to the fortune of the company as a whole.
"The option grant made to Mr. Chambers was based upon his performance and leadership with the company and placed a significant portion of his total compensation at risk, since the value of the option grant depends upon the appreciation of the company's common stock over the option term," the company reported in an SEC filing.
The filing also stated that 4 million of Chamber's grants have a strike price of $50.37 a share and will be worth $274 million when they expire in 2009 assuming a 10 percent appreciation during that time. In addition, the remaining 2 million shares in the package will reach a value of $50.4 million when they expire in 2010 on a strike price of $18.57.
Chambers did not exercise any stock options during Cisco's fiscal year 2001, which ended July 28, but he now owns a total of 18.8 million exercisable options and 12.6 million that remain restricted.
The remaining top executives at Cisco saw their salaries increase this year but received lesser option grants. CFO Larry Carter made $424,212 this year compared with $386,262 last year, but took a hit in the options department, reaping only 600,000 shares vs. 850,000 in the previous year.
Senior Vice Presidents Richard Justice and Michael Volpi also gained 600,000 in options this year and made 900,000 last year. James Richardson, a senior vice president of Cisco's enterprise business, received 587,000 options in fiscal 2001 and 650,000 in 2000.