Intel's latest annual SEC filing http://www.sec.gov/Archives/edgar/data/50863/000095013406005369/f12968prpre14a.htm#113 provides a big surprise in the summary of total compentation for Intel corporate officers:
Paul Otellini (PSO) gets a 79% increase in total compensation and 35% increase in salary!!
Wow, he must be doing really well, and must have gotten a great rating (Outstanding, Exceeds Expectations, ?) in whatever counts as the Focal process for upper-managment at Intel. (After all if the focal process works to weed out undesirables in the common ranks, we better be using it on our executive staff too, right?)
But a 35% increase in salary is very large. You can't even that with an Outstanding rating, so he must have gotten a really good target market adjustment!
Lets examine this a bit.
What about a target market adjustment? In 2004, the average CEO of a major company received $9.84 million in total compensation http://www.aflcio.org/corporatewatch/paywatch/. Ok, Intel likes to pay near the average, so this makes sense, Intel needs to get PSO a pay bump up a bit so he doesn't feel bad when he talks to his fellow CEOs on the golf course.
But Intel does not care about pay with respect to market average, in general, but only pay at companies it compete with. After all, Paul can't really go off and run any old company, just ones in market segments he has some knowledge about. So, we should look at averages over Intel competitors, not over the whole market.
Whose is Intel's chief competitor? AMD of course. So, what about AMD? Dr. Hector de J Ruiz has been CEO of Advanced Micro (AMD) for 3 years, Total Compensation in 2004: $2.3 mil
So AMD has an experienced CEO (3 years vs. Otellini 9+ months) who is expanding his company's market segment share, with products that beat Intel products in most common performance benchmarks. And that CEO is making far less than Otellini. Gee, maybe Intel should hire Ruiz! They could offer to double Dr. Ruiz's total compenstation & it would still cost Intel less than keeping Non-Dr. Paul.
Hmm, lets examine Paul's Exceeds Expectations message a bit. First what are his recent responsibilities for Intel?
1998-2002: VP of Intel Archiecture Group
Jan 2002: Promoted from VP in charge of the microprocessor division to President and COO
May 2005: Took charge of Intel as CEO
How has Intel done while Non-Dr. Paul was in charge? First, what about that basic indicator, stock price? Lets see:
Today: $19.64
May 2005: $25.93
Jan 2002: $34.48
Looks like a steady drop since PSO got more and more responsibility.
So what did Intel get while non-Dr. Paul was head of architecture group? Itanium, or as the industry knows it , Itanic, an architecture failing to gain any significant market share while Intel continues to pour money into it. Intel behind AMD to a x86 product with 64bits, Intel behind on launch of Dual Core processors, Intel behind AMD to on-chip memory contollers (and under our current roadmap, continuing to be behind on this key technology initiative by years, something non-Dr. Paul is still too uneducated enough to fix, even with his increased power at CEO).
And what do we get once he becomes CEO:
Jan 18th 2006: Intel executives said Tuesday that they expected to lose about one point of market share to AMD during a disappointing fourth quarter. http://news.com.com/AMD+market+share+soars+in+PCs/2100-1003_3-6028349.html
Otellini's nine-month tenure as CEO has been marked by missed projections, product delays and customer defections. Intel will probably slice prices by as much as 50 percent to regain sales, according to analysts. (http://worcester.pressdemocrat.com/businesswire/html/BusinessAtNoon20060303.html)
Hmm, clearly a Below Expectation message, certianly not an Exceeds Expectation message.
So, how does Intel justify the raises to PSO when clearly he is BE or IR and his total compenstation already exceeds the compenstation of the CEO of Intel's chief competitior?
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