SiliconBeat

Henry Waxman, chairman of the House Oversight and Government Reform Committee, sent out a letter today to the 250 largest public companies in the U.S. asking them to provide information about how executive compensation consultants are used by these corporations in setting executive pay.

That would include several big names locally, including Hewlett-Packard, Intel, Cisco Systems, Apple, Oracle, Sun Microsystems and Google.

Previously Waxman had requested information directly from compensation consultants regarding their work for these companies and held hearings on the matter in early December.

Later that month the committee released a report that found, among other things, that “over 100 large publicly traded companies hired compensation consultants with substantial conflicts of interest in 2006. In many cases, the consultants who are advising on executive pay are simultaneously receiving millions of dollars from the corporate
executives whose compensation they are supposed to assess.” (For the record, we were shocked by the news.)

Today’s letter is asking the companies that use compensation consultants several questions, including:

• Who retained the consultant? Was the consultant retained directly by the compensation committee? By management?
• To whom does the consultant report? Does the consultant report directly and exclusively to the compensation committee? To management?
• Has the consultant performed other services for the company unrelated to executive compensation (e.g., benefits administration, actuarial services)?
• Did you disclose to your shareholders the role of the consultant in determining or recommending executive compensation?
• Did you disclose to your shareholders information regarding other services provided to the company by the consultant? If so, please identify the disclosure.

The committee is expecting a quick turnaround on its requests, asking that companies respond in writing by Feb. 22. We imagine we’ll see this information spelled out in the next big batch of proxies due to come out over the next few months, if companies haven’t included this information previously.

   On Jan. 7, ShoreTel shocked investors when it it warned that sales for its quarter ended Dec. 31 would be in the range of $29.7 to $30.7 million, lower than its previous expectation of $32 to $35 million, and below the $34.2 million analysts had expected. ShoreTel’s stock nose dived after the news, falling by $7.06, or 54 percent, to $6.02.

Two things happened as a result, one fairly predictable and one not so much.

Read the rest of this entry »

As if merging companies isn’t enough of a pain. Now executives have to worry about employees running amok with their company blogs and all that Web 2.0 stuff.

Case in point: BEA Systems (ticker:BEAS) and its deal with Oracle (ticker:ORCL). After an on-again, off-again courtship, Oracle announced earlier this month it was buying BEA for $19.375 per share.

Naturally, this has prompted all sorts of anxiety-producing questions in the minds of BEA employees. (Does being assimilated hurt? Will Larry invite me to that big Japanese pad of his? Am I required to understand the finer points of really big sail boat races?)

As companies do, BEA issued employees a helpful memo answering their most pressing questions and marked it “confidential.” And then it filed that Q&A with the U.S. Securities and Exchange Commission on Wednesday.

Among the burning questions that are apparently on the minds of BEA employees: ”Are there any restrictions on blogs or other communications?”

BEA’s response:

“BEA blogs must not discuss Oracle or the proposed merger in any way. If a third party posts a message related to this topic, please respond that the purpose of the blog is to discuss BEA products and technology trends, and that the blog cannot be used to discuss Oracle or the proposed merger. Similarly if a BEA employee blogs on non-BEA sponsored sites, the proposed merger with Oracle is off limits for discussion. All proposed communications to a broad internal or external audience requires the approval of the BEA integration team.”

Will an army of BEA bloggers stage a revolt to defend their liberties? Stay tuned…

The fact that Rambus (ticker:RMBS), the Los Altos chip company, awarded bonuses to its executives in 2007 normally wouldn’t be noteworthy given their puny sizes by Silicon Valley standards.

In an 8-K filed Tuesday, the company disclosed that it gave CEO and President Harold Hughes (at right) a bonus of $168,000. Satish Rishi, chief financial officer, only got $90,000. Bottom line: Oracle CEO Larry Ellison sold more stock Tuesday than the top seven executives at Rambus collected in bonus money last year.
 

What caught our eye, however, was that the company said it awarded the bonuses even though the company didn’t meet the ”adjusted pre-tax income target” it had set for executives to receive bonuses. The filing notes that “the Compensation Committee approved the discretionary funding of the Incentive Plan at 40% of the pre-approved target level for fiscal year 2007.”

Why? The filing explains that the committee considered other factors such as market conditions and “increased litigation expenses.”

Indeed, it’s been a hard year for poor Rambus. It lost a big ruling by the U.S. Federal Trade Commission. It settled an investor lawsuit over mis-priced stock options.

Sounds bonus-worthy to us.

Hewlett Packard managed to keep Chief Executive Mark Hurd’s compensation safe from the ravages of inflation last year with his total package growing 5.1 percent in value. (Consumer prices rose 4.1 percent in 2007.) At his level, that works out to about a $1.2 million raise, according to the company’s proxy filing today.

Hurd’s cash from salary and bonus increased in fiscal 2007 by $792,934, or 5.6 percent, to $14.77 million. The value of restricted stock and option awards rose $428,714, or 4.5 percent, to $9.96 million. The value of perks and other compensation was little changed at $517,454.

Hurd did less traveling on the company’s dime last year as he racked up $52,906 worth of travel in HP aircraft, down from $111,067 the year before. Hurd still gets a mortgage subsidygranted to him when he was first hired that was worth $111,082 last year, or about $9,257 per month.

The cost of securing Hurd rose 5.4 percent in 2007 to $125,825. But that’s still a bargain compared with Larry Ellison, on whose behalf Oracle spent $1.7 million for security last year.

And we noticed that Hurd seems to be a good saver. He opts in to the company’s 401-k
program and earned $13,200 in matching payments from HP last year. (Hmmm, do you suppose the $19,700 Hurd got in “financial counseling” assistance last year resulted in advice that he also take advantage of the IRS’s “catch-up” provision that allowed those of us over 50 to put away an extra $1,000 in an IRA last year?)

Oracle (ticker:ORCL).

CEO Larry Ellison.

Sold 1 million shares Tuesday.

Collected $20.19 million.

‘Nuff said.

Read all about it.

While you were loafing around by the espresso machine at work, Oracle (ticker:ORCL) CEO Larry Ellison just made more money in one day than you will all year.

According to a Form 4 filed Monday, Ellison sold 1 million shares today at $20.2147 per share to collect $20.2 million.

When it comes to stock sales, Ellison is off to a quick start in 2008. Before the sales Monday, he had already sold $299.6 million worth of stock this year. Perhaps he’s just determined to top the $1.54 billion he sold in 2007.

It’s not cheap to change your chief executive, especially when the old one sticks around as a special advisor. Just ask eBay.

The company filed details of compensation being offered to its new CEO, John Donahoe:

• Salary: $900,000. (OK, that’s a slight savings, as Meg Whitman got $995,016 last year. But she’s sticking around as a “special advisor” making $600,000 a year.)
• Bonus target: $1,125,000. (Once again, a slight savings from the $1,132,692 Whitman got in 2006, the most recent figures available. Note: stock price fell 30 percent that year. And as special advisor she’s got a target bonus worth $600,000. In addition, she remains eligible to get extra money she would have received with respect to the 2008 annual component of the “eBay Incentive Plan” had she remained eligible to receive payment through the first quarter of 2009.)
• Long-term equity award: $8 million worth of stock options and restricted stock units. (Whitman, who will get no new equity awards, will get continued vesting of performance-based restricted stock units she would have been granted had she remained eligible to receive them through the first quarter of 2009.)
• Promotion award: $15 million worth of stock options and restricted stock units.

Whitman , who will remain on eBay’s board, will also get free office space and “secretarial services” for three years. Memoir, anyone? (Whitman is reportedly toying with the idea of a run for governor of California.) If nothing else, her arrangements allow her to bide her time in case some of her 2.8 million underwater options rise up into the money.

In the roughly five months before Meg Whitman announced Wednesday she would step down as chief executive of eBay, she made more than $100 million exercising options for the first time since the company went public, bringing her take from eBay stock to more than a half billion dollars.

EBay’s shares fell the next day, dropping $1.76, or 6.1 percent, to $27.18 before closing
Friday at a 52-week low of $26.83.

In addition to the Whitman announcement, eBay also released results Wednesday for its
fourth quarter, which beat Wall Street expectations, but warned of slower-than-expected growth.

Whitman’s recent stock sales were made under a trading plan she set up last February to sell up to 6.4 million shares between June 2007 and February 2008. The plan was formed under SEC rule 10b5-1, which permits insiders to adopt plans for selling or purchasing specific amounts of stocks over a certain time, so long as the individual is not in possession of “material nonpublic information” when the plan is adopted.

Whitman’s announcement Wednesday raises a question: when did she know she was going to quit, and could her decision be considered “”material nonpublic information”?

We asked eBay but received no reply after two days.

During a conference call Wednesday, Whitman told analysts, “I’ve repeatedly said that 10 years was about the right amount of time for any CEO to stay at the helm of a company. Now that I’ve reached that milestone, I’ve decided that it’s time for eBay to have new leadership, a new perspective and a new vision.”

When we asked about the sales back in September, a spokesperson for eBay assured us that Whitman remained committed to the company and that her sales were simply a part of her “personal asset management.”

An option grant for 2.4 million shares given to Whitman when she was hired cost her
$480,000 to exercise before the company went public. She used $60,000 of her own money and borrowed the rest from eBay. Those shares, when sold over the years, brought her $412 million, according to Thomson Financial.

The Los Angeles Times reported Friday that Whitman appears to be investigating a career in politics, citing a source “close to her” who said she had been ‘talking with Republicans around the state” about running for governor of California in 2010, and “had become ‘fascinated’ by politics in her work as a fundraiser for GOP presidential hopeful Mitt Romney, a former governor of Massachusetts and a former colleague of Whitman at the consulting firm Bain & Co.”

That’s the same firm where she found her eventual successor, John Donahoe.

Like Romney is doing, Whitman could easily finance her own campaign, as she ranked No. 361 on Forbes’ 2007 list of the richest Americans, with an estimated net worth of $1.4 billion.

Zilog’s chief executive sent a letter to Universal Electronics (UEI), which has made an
unsolicited bid buy the maker of computer chips for toasters and automobiles for $4.50 a share on Jan. 11, telling the would-be buyer that it needs a few more days to evaluate the offer, according to an SEC filing Thursday.

The offer is being made in collaboration with Zilog’s fourth largest shareholder, the
ubiquitous (at least in Silicon Valley) Bryant Riley, who controls 1.1 million Zilog shares,
or 6.7 percent.

The take-it-or-leave-it offer was originally set to expire Jan. 21 but the deadline was extended to Jan. 29. However, even that may be too soon. “As we discussed on the phone we are carefully evaluating your proposal with the assistance of our financial and legal advisors,” wrote Darin Billerbeck to Universal Electronics CEO Paul Arling. “We do not anticipate being in a position to respond to your offer prior to February 1, 2008. Unless we hear otherwise from you, we will assume that your offer will continue in full force and effect until 5 P.M.” that day.

Shares of Zilog, which has had multiple lives as a public company, hit a 52-week high of $6.08 in May but ended the year down 20 percent. The day before the offer was revealed on Jan. 18, Zilog shares closed at $2.69. They rose 61 cents, or 23 percent, on the news to $3.30 and closed at $3.83 today.

That’s a 67 cent per-share profit for the arbitrage bettors among you, should the deal go through.