SCO exec gets raise despite shortfall

Santa Cruz Operation last year gave its chief executive a salary increase and bonus amid falling revenues and layoffs.

Dawn Kawamoto Former Staff writer, CNET News
Dawn Kawamoto covered enterprise security and financial news relating to technology for CNET News.
Dawn Kawamoto
3 min read
Santa Cruz Operation (SCOC), which last week saw its stock plummet after announcing that it would fall short of analysts' first-quarter expectations, last year gave its chief executive a salary increase and bonus amid falling revenues and layoffs.

Alok Mohan, Santa Cruz Operation's CEO, received an 8.2 percent salary increase, to $317,596, in fiscal 1997. He also got a $90,353 bonus and options for 1.08 million stock shares, with strike prices ranging from 4-7/8 to 7-1/8, according to a recent Securities and Exchange Commission filing.

That compensation package came at a time when the Unix systems and NC software company posted declining revenue of $193.7 million for the year ending September 30, 1997, compared with $207.9 million for the same period a year ago.

The company again posted a net loss in 1997, but it shrank to $15.2 million from $22.4 million during the previous year.

SCO's board, which determines bonuses for executive officers, bases them on the officer's base salary, the company's financial performance, and individual performance during the fiscal year, according to the filing.

SCO shareholders, however, may have a different assessment of the company's performance than its board. Investors who would have plunked down $100 for SCO shares at the end of fiscal 1996 would be holding $84 at the close of fiscal 1997, while a similar investment in the technology-heavy Nasdaq index would have left investors with $137.30 for the same period, according to the SEC filing.

During fiscal 1997, SCO's board members--who also sit on the company's compensation committee--evaluated Mohan's scope of responsibility, prior experience, and salary history, and compared his salary with those for similar positions at comparable high-technology companies, the filing stated. His compensation was set after the board members assessed his prior performance and his expected contribution to SCO's future success.

SCO officials were not available for immediate comment, but Jon Holman of the Holman Group, an executive search firm in San Francisco, said Mohan's windfall may have been warranted.

"In absolute terms, one question is what an executive of SCO's size should be paid. The idea of a CEO earning...a compensation package of $400,000, for SCO's size is not [unusual]," he said. "That is something a thoughtful board would look at."

Holman added that the issue of a salary increase and bonus might weigh more heavily if SCO had a history of financial shortfalls, which it does not. He said SCO's board may have felt the company was not going to perform well for the year, but wanted to compensate Mohan for exceeding expectations.

SCO said last week that its first-quarter revenues would fall between $45 million and $50 million, which would mark the third consecutive quarter in which the company's year-to-year revenue growth has dropped. The company also said it would post a profit of between 2 cents and 5 cents a share, compared with analysts' expectations of 11 cents a share.

Following that preliminary warning on Friday, investors saw SCO's share price fall 19.4 percent, to 3-1/2, down 27/32.

The company will release its earnings results January 27.