By now, you’ve probably heard that HP poached Dell’s CIO Randy Mott in July. What you may not have heard about is the dude’s compensation package. Allow me to fill you in on the details.
According to documents HP filed with the SEC when it brought Mott on board, HP is paying Mott an annual base salary of $690,000 per year, giving him a half million stock options, 285,000 shares of restricted stock, a short-term bonus worth his entire annual salary and a $5 million long-term performance bonus that’s guaranteed even if the company tanks (if HP meets or exceeds his target, he could earn up to $10 mil, according to Reynold Lewke, a partner with recruiting firm Egon Zehnder’s CIO practice.) Not bad, eh?
Well, it gets better. Just for accepting HP’s offer, Mott scored a $2.2 million signing bonus, and HP is giving him a million dollars to move from Austin to Palo Alto.
Mott’s compensation package, valued at $15.3 million, may sound extravagant–excessive even–but in the immortal words of Tom Jones (and Egon Zehnder’s Lewke), “It’s not unusual.”
“When you look at the size of the company he’s going to, when you look at the fact that he’s going to be responsible for several thousand people, the better part of a couple billion dollars in revenues, and costs, it’s generous but it’s in line with the compensation package of other Fortune 50 CIOs who report directly to the CEO and who have similar responsibility,” says Lewke.
The other factor to keep in mind, according to Lewke, is that Mott is going to be very much a sales person for HP so he needs to be compensated for the time he’s going to spend hob-nobbing with CIOs to drum up business, in addition to overseeing the infrastructure and setting IT strategy.
Finally, says Lewke, Mott’s new compensation package reflects the accumulated value of the long-term incentive packages to which he’s been privy during his five year tenure that HP had to make up for. “HP had to do something that would compensate him for the money he was walking away from [at Dell.]” Hence the stock options, the restricted stock and the $2.2 million signing bonus. “They had to make it worth his while to come over.”
As for the million dollar moving allowance, “That’s what it takes to get somebody at that level to move to the valley,” says Lewke, who adds that a modest 1500 square foot bungalow with three bedrooms and two baths fetches $650,000 these days.
Now for the irony: within days of Mott’s appointment, HP announced a major restructuring and layoffs (much of which will affect the IT department) aimed at shearing the company of $1.9 billion in costs per year beginning in 2007. So it looks like a few IT workers are at HP are making way for Mott’s salary and bonuses. Lewke says people around the Valley were saying soon after Mott was hired at HP, “I’ll take some of that and keep my job, thank you very much.”