http://blogs.barrons.com/techtraderdaily/2015/08/04/qualcomm-why-doesnt-management-give-back-some-bonuses-asks-bernstein/?mod=yahoobarrons&ru=yahoo
The Street continues to ponder chip maker Qualcomm’s (QCOM) announcement two weeks ago of a restructuring that involves slashing 15% of its workforce and contemplating a possible split of the company’s divisions.
Yesterday, Stacy Rasgon, who has a Market Perform rating on the shares, opined that management should re-examine what it’s paying itself.
“Frankly, the idea enormous management “retention” bonuses, paid out right in front of collapsing business fundamentals and large structural layoffs, sticks in our craw,” writes Rasgon.
Rasgon notes the large amount of restricted-stock units, or RSUs, paid to CEO Steve Mollenkopf, who took office in the Spring of 2014, and other top management:
In Fiscal 2014 Qualcomm awarded a tremendous amount of stock compensation to its senior executives. This compensation took the form of “front-loaded” RSUs (essentially granting 5 years’ worth of stock all at once) as well as “special” equity grants. – In particular, Mr. Mollenkopf received $50M worth of special compensation ($30M in front-loaded RSUs, and $20M in special grants. Dr. Jacobs received $45M in front loaded RSUs. President Derek Aberle received $16M in front-loaded RSUs, and $11M in special grants. CFO George Davis received $6.9M in front-loaded RUSs. And the co-Presidents of QCT, Cristiano Amon and Venkata Renduchintala received $4.1M and $6.9M in front-loaded RSUs, respectively, along with $3M in special grants apiece. All together the company’s six named executive officers received close to $150M in “special” compensation as a result of these grants, and close to $175M after factoring in the ordinary annual PSU grants (and is on top of over $11M in non-equity compensation).
Although these payments were billed as “accelerations” of what the executives might receive over future time periods, writes Rasgon, “That being said, we find the behavior to reward management so richly, while the company’s fundamentals were in the process of deteriorating (resulting in significant reductions in the rank-and-file) to be extremely distasteful.”
Rasgon thinks they should consider giving some back:
We therefore believe it would be a strong symbolic gesture for senior management to offer to share the pain, and voluntarily relinquish some of this compensation (something similar to the current magnitude of the cuts would probably not be out of line). We believe such an action would be beneficial to investor perception of the management team, and quite possibly, beneficial for the stock.