June 18, 2019

Agenda – ‘Rare’ Bonuses Could Draw Pay Rebuke

By Jennifer Williams-Alvarez

On the news that Apple and Qualcomm had settled long-running litigation over how the latter company charged royalties on patents, Qualcomm awarded five higher-ups with bonuses.

The compensation committee granted fully vested shares to recognize “the outstanding efforts of the executive management team, both individually and as leaders of the teams involved,” in achieving license and chip-set supply agreements and resolving the dispute with Apple, according to a May 10 regulatory filing. “In making these grants, the Compensation Committee considered the anticipated long-term stockholder value resulting from these agreements with one of the Company’s key customers.”

The five executives benefiting from the awards — CEO Steve Mollenkopf, President Cristiano Amon, Chief Technology Officer James Thompson, general counsel Donald Rosenberg and interim CFO David Wise — were given anywhere from nearly 3,000 to north of 40,000 company shares.

Granting bonuses to a number of executives tied to legal matters is an unusual move, sources say, and one that may bring scrutiny. “It’s not very common because it’s really a special bonus, and investors usually want companies to deal with most bonuses inside the four corners of their incentive plans,” says Robin Ferracone, CEO of compensation firm Farient Advisors.

“The upside is, you’re rewarding a team who got a good result, and I think that’s a good thing,” says Ferracone, who is also chair of the compensation committee at Trupanion, a pet insurance provider. “The downside, I think, is to include a CEO in a special reward — proxy advisors and investors may have a negative view on this.”

In fact, Rachel Hedrick, senior compensation analyst at Institutional Shareholder Services, who describes it as “relatively rare” to see special grants paid to a number of executives, says ISS gives considerable attention to awards made outside of the equity plan.

“We look at them very carefully, because they are unexpected for investors,” explains Hedrick, who spoke generally.

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