Here’s How Top Tech Companies Compensate CEOs

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To put it lightly, executive compensation is a hot-button issue. In the wake of the 2008 financial crisis there was a public uproar over what were seen as outlandish banking bonuses and the astonishing discrepancy between executive pay and median worker pay. At issue is not just the size of executive compensation packages, but their nature.

The post-recession financial industry was a case study for this. Shareholders wanted boards to design compensation packages that scaled with the performance of the company. A few million dollars to a top executive is a justifiable salary only if the company is performing well. If the stock is crashing, sales are down, and talent is jumping ship, then every single one of those dollars suddenly seems misplaced.

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The New York Times recently reported on the compensation packages for the 100 highest-paid CEOs at U.S. publicly-traded companies in 2012. Compiled by Equilar, an executive compensation data firm, the data only includes companies that reported through March 29 and pulled in at least $5 billion in annual revenue. In the interest of time and space, we won’t walk through the whole list. (Curious minds can find it here.) Instead, let’s take a look at how the top 3 technology companies on the list — those that increased profit the most — rewarded the CEOs that lead them…

1) Western Digital (NYSE:WDC)

Year over year, Western Digital stock is up more than 32 percent. The ride hasn’t been particularly smooth (the stock has a beta of 1.41) but it is backed by 31 percent revenue growth to $12.5 billion and 113 percent earnings growth to $6.58 per diluted share in 2012. On Monday, at $51.84 per share, the stock was trading about 1.6 percent higher than the mean analyst price target of $51.03. Estimates are looking for a 19 percent year-over-year increase in fiscal third-quarter revenue, but a 30 percent decline in earnings.

With this as a backdrop, CEO John Coyne received a 146 percent increase in total compensation in 2012, from $7 million to $17.2 million. This was primarily the result of a $6.3 million stock award, a $2.4 million increase in bonus, and $1.5 million in additional options.

Salary Bonus Perks and Other Stock Options
2011 Compensation $978,846 $4,308,750 $43,250 - $1,676,928
2012 Compensation $1,000,000 $6,772,500 $41,770 $6,304,158 $3,102,450

2) AT&T (NYSE:T)

Year over year, AT&T stock is up 26 percent. Revenue at the telecom giant increased 0.56 percent in 2012 to $127.4 billion in 2012, while earnings increased 88 percent to $1.25 per diluted share. On Monday, at $38.28 per share, AT&T traded about 4 percent higher than the average analyst price target of $36.80. Estimates are looking for current-quarter revenue to fall 0.20 percent to $31.75 billion and earnings to increase 6.6 percent year over year to $0.64 per share.

With this as a backdrop, CEO Randall Stephenson received a 12 percent increase in total compensation in 2012, from $18.7 million to 21.0 million. This was primarily the result of a larger bonus.

Salary Bonus Perks and Other Stock Options
2011 Compensation $1,550,000 $3,787,500 $555,353 $12,749,979 $45,543
2012 Compensation $1,550,000 $6,060,000 $803,308 $12,586,590 -

3) Cisco (NASDAQ:CSCO)

Year over year, Cisco stock is up 9.17 percent. Revenue increased 6.6 percent year over year in 2012 to $46 billion, while earnings increased 27.5 percent to $1.49 per diluted share. At $21.20 per share, the stock traded about 9.8 percent below the mean analyst price target of $23.52 per share. Estimates are looking for current-quarter revenue to increase 5.2 percent to $12.19 billion, and earnings to increase 1 cent to $0.49 per share.

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With this as a backdrop, CEO John Chambers received a 9 percent reduction in total compensation in 2012, from $12.9 to $11.7 million. This is due primarily to a reduction in stock-based compensation.

Salary Bonus Perks and Other Stock Options
2011 Compensation $375,000 0 $11,025 $12,500,100 -
2012 Compensation $375,000 $3,953,376 $11,025 $7,348,265 -

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