Scott McNealy, Sun Microsystems' chairman and chief executive, took home $48 million in total compensation for fiscal 1998, in large part due to options he cashed in, according to a proxy filed today with the Securities and Exchange Commission.
Sun's top dog received $2.9 million of his compensation in salary, bonuses, and long-term pay last year. But he got an additional $45.1 million from options he pocketed during fiscal 1998.
He received a 25 percent increase in the number of options he was granted, and was awarded 400,000 options with a strike price of $43.63 per share, which were valued at nearly $11 million based on the company's estimate of a 5 percent appreciation.
Although Sun's board bumped up McNealy's base salary by 7.5 percent to $698,846 over the previous year, the CEO fell far short of maximizing his bonus targets, and received only $998,760 in bonuses. Had he hit all the targets, he would have been eligible for a target bonus worth 200 percent of his base salary, or nearly $1.4 million.
Last fiscal year, McNealy received a bonus of $1.9 million.
"In prior years, for the chief executive officer, the [board's compensation committee] had targeted the lower end of the base salary range determined by its aforementioned competitive analysis, giving more significant emphasis to annual bonuses and longer-term incentives for Mr. McNealy's total compensation package," the filing said.
"In this regard, over the last three fiscal years, the committee has tied a substantial portion of Mr. McNealy's compensation to his annual bonus," it continued.
McNealy's bonus was tied to earnings and revenues goals; corporate performance based on business, operations, and management goals; and customer-quality goals. Sun's annual revenues grew 14 percent in fiscal 1998, compared to 21.2 percent growth the previous year. Its earnings per share rose to $2.30 for the year, compared to $1.89 the previous year.