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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