How much is this payday worth? Once the 40% hurdle is cleared, this bonanza will be worth $18 million. If the stock price rises to the average five-year price, it will be worth over $34 million.
That's pay. But where's the performance? Was this stock option arrangement really necessary to entice Whitman to the CEO spot and motivate her to perform her job? Other than a motivation to not sink the stock again, how does it motivate her to make a real difference over that which she can control?
Timing is everything -- and Lane has suffered similar good fortune. HP's stock price was down by 45% during Lane's tenure as a board member (and as chair) before he assumed the executive chair position. Yet despite HP's poor performance during his earlier tenure, he was awarded an option to purchase 1 million shares when he became executive chair, with similar vesting requirements as Whitman's. What does this mean? He'll get a haul that is more than half of Whitman's. Such pay can only be described as stratospheric for an executive chair.
Some shareholders, who are voting again on executive pay this year, will be considering whether a director "say on pay" proposal (as appears on Apple's (AAPL) 2012 proxy) could address these concerns in future years.
A board that's spread too thin
HP has had significant turnover on its board, and this year is no exception. For any board, selecting the right members with the time and talent to do the job well is critically important. Directors' "service on other boards of public companies should be limited to a number that permits them, given their individual circumstances, to perform responsibly all director duties," the HP proxy says.
What are the general guidelines good boards follow? At most, sitting CEOs should sit on one outside board and board members who have retired from full time executive duties should sit on a maximum of four boards. If the director is the chair or lead independent director, or if the director runs a company or sits on the board of a company that needs particular attention, they should sit on even fewer boards.
HP would, by most any measure, fit in the "needs attention" category. HP's board did not turn in a stellar performance last year and the company is in need of a clearly articulated strategy that the board has adequately vetted and approved. But taking into account the stated HP policy and the attention HP needs from its board, some members up for election don't appear to qualify.
Whitman sits on three outside boards -- P&G (PG), Zipcar (ZIP), and Zaarly -- all of which "she committed to serve on … before she agreed to become HP's president and CEO," according to an HP spokesperson. But Whitman didn't actually join Zaarly's board until over a month after her tenure as CEO had already begun.
Whitman finds her outside board service to be of value and "plans to honor all of her outside board commitments as long as they do not interfere with her obligations to lead HP," HP's spokesperson says.
