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Leo Apotheker was elected as the CEO of Hewlett-Packard (NYSE: HPQ ) on Sept. 30, 2010, with the stock closing at $42.07. eBay (Nasdaq: EBAY ) ex-CEO Meg Whitman replaced Apotheker as CEO on Sept. 22, 2011, with the stock closing at $22.80, representing a gut-wrenching decline of 45.8% during his almost one-year tenure.
His reward for destroying roughly $52 billion in shareholder value?
Pay for (poor) results
A severance payment of $7.2 million paid in installments over the next year and a half, a $2.4 million annual "Pay-for-Results" bonus, accelerated vesting of 156,000 shares of restricted stock valued at nearly $3.6 million, and paid relocation for him and his spouse back to France or Belgium with executive air travel. Oh, and and HP will eat up to $300,000 in losses related to the sale of Apotheker's California residence.
Sounds like a pretty sweet deal to me, even if it's a little short of predecessor Mark Hurd’s $35 million parting gift. How hard could it be to cut revenue forecasts multiple times, agree to pay a 64% premium -- and nearly a fifth of HP's market cap at the time -- for a software company that brings in 0.8% of HP's quarterly revenue, and ax a new product in a growing market after less than two months?
Think they'll have a spot for me if Whitman strikes out? I can do all of those things in my sleep.
The new deal
Whitman is getting a different deal. Her base salary will be a negligible $1 per year, similar to Apple ex-CEO Steve Jobs. She has options to buy up to 1.9 million shares of HP that are good for eight years but will vest in full only if the stock rises by 40%. Her target bonus for HP's fiscal year 2012 is $2.4 million and tops out at $6 million if she delivers.
Additionally, HP's executive chairman, Ray Lane, is getting options to buy up to 1 million shares with similar strings.
One for the books
I think HP's board will go down in history as one of the worst ever assembled. It's bad enough that they hired Apotheker sight unseen and twiddled their thumbs as he changed course, and then realized after the fact that the new direction wouldn't sit well with shareholders. Now they're giving him a boatload of money as they send him on his merry way back across the pond and potentially try to root themselves further into the status quo.
The board is supposed to help mitigate conflicts of interests, not exacerbate them. Until HP gets a new board of directors, this is one fiasco that's better to watch -- with our Watchlist feature -- from afar.