Did eBay CEO John Donahoe’s Pay Go Down by 53% or Up by 114%?

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There has been much reporting in the press about the 53% drop in eBay (NASDAQ: EBAY  ) CEO John Donahoe's pay. His headline reported pay did go down from $29.7 million to $13.8 million, due in large part to a much smaller stock award in 2013, down to $8.9 million from $23.7 million in 2012.

However, that is only one way to look at pay.

As required by the SEC, companies must report a headline total pay figure. This is comprised of: salary, cash bonuses, the estimated value of stock and stock options granted in the year, benefits, and perquisites. It's a good reflection of what the board thought about performance during the year.

But there is another calculation out there that reflects past performance over more than just a single year, and that is realized pay. Realized pay is comprised of: salary, bonus, the actual value of stock vested in the year, the actual profits on stock options exercised during the year, benefits, and perks.

The big difference is in the stock valuation, and it can make a very substantial difference in pay figures.

Realized pay more than doubled

Looking at realized pay, Donahoe's total went up from $22.8 million in 2012 to $48.8 million in 2013, largely due to very substantial vested stock amounts and profits on stock options. Thus his realized pay did not fall, but increased by 114% in 2013.

The driving force behind this substantial increase was a $22.6 million profit on stock options exercised in 2013 but held for a number of years and reflecting the rise in eBay's stock price over the period, and the vesting of $23.4 million worth of shares. These shares were based on performance over one and two years, measuring total stockholder return for one tranche (the single-year measure), and foreign exchange neutral revenue, non-GAAP operating income, and return on invested capital (the two-year measure).

This last group of metrics is also to a large extent what the annual bonus is based on, but the bonus removes the ROIC metric, replacing it with "net promoter score," a customer service metric. The good performance in 2012 against these metrics was not matched in 2013, reflected in a $1.2 million lower bonus in 2013 for Donahoe.

It could be argued that all this is based on performance, though longer-term metrics for the so-called long-term awards might be in order.

The true story about CEO pay is rarely simple and the SEC would help everyone out by mandating wider and more detailed and consistent reporting of pay so that investors can see the whole picture not just the headlines. 

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  • Report this Comment On March 23, 2014, at 7:22 PM, PhilipCohen wrote:

    What was it? Lies, damn lies, and statistics ...

    News Flash: Johnny Ho was responsible for eBay acquiring PayPal!

    Johnny Ho certainly has the eBay Dept of Spin working overtime to counteract the Carl Icahn offensive: yet another SEC filing …

    In this notice to the SEC, one of the only three “What Others Are Saying” complimentary quotes that the eBay Dept of Spin has been able to find—to try lift Johnny Ho’s spirits—credits the Ho with being responsible for eBay acquiring “PreyPal” (shades of Scott Thompson’s CV). eBay acquired “PreyPal” in 2002; the cretinous “Pain from Bain” did not arrive on the scene, as president of eBay Marketplaces, until March 2005. Such a fundamental error says a lot about the lack of professionalism of the people at eBay, particularly those in the eBay Dept of Spin …

    Still, I love the pretty graphs and, of course, there are lies, damn lies and statistics: 441% increase in share price—LOL! What does the “smart money” on Wall Street really think about the progress of Johnny Ho’s delusion of converting eBay into the world’s “Westfield Mall” of online shopping? Well, in August 2007—when the Ho turkey had already been in control of eBay Marketplaces for over two years (see Sept 2007 Legg Mason “Thought Leader Forum” interview at—eBay’s and Amazon’s stock prices were both ~$40; now, eBay is still only ~$59 and Amazon is ~$370.

    Ah, but what about all the stock splits, you say? Well, there has not been a stock split by either Amazon or eBay since 2005. But let’s then be fair and look at the value of both these entities since their IPOs, taking into account their stock splits:

    eBay: 3 x 2:1 and 1 x 3:1; ie 9 x $59; equates to a current sans-splits value of ~$531

    Amazon: 2 x 2:1 and 1 x 3:1; ie 7 x $370; equates to a current sans-splits value of ~$2590

    The only thing that baffles me about this headless turkey is how, every year, he manages to avoid the Thanksgiving diner table …

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Paul Hodgson

Paul Hodgson is a freelance journalist and independent commentator on corporate governance as well as conducting contract work for governance research firm BHJ Partners. He was formerly The Corporate Library’s and then GMI Ratings’ Chief Research Analyst for board and executive compensation, and its most prolific author. Mr. Hodgson has been researching and writing about executive compensation for over 20 years, eight of which were spent in England, where he worked for the Incomes Data Services journal Management Pay Review as researcher and assistant editor. He is a prolific blogger and the author of numerous books and research reports on executive pay and has also had articles published in a number of journals, including ‘Forbes’, ‘Business Week’, ‘Responsible Investor’, ‘Directorship’, ‘Ivey Business Journal’, and ‘Directors and Boards’. Mr. Hodgson is the author of the book Building Value Through Compensation, published by CCH Publishing. He is widely quoted in national print media as an authority on executive compensation, and has appeared on numerous television and radio stations. Google

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