Nvidia’s compensation “plan” seems much ado about nothing
Nvidia filed (some) details of its newly approved Fiscal Year 2009 Variable Compensation Plan with the SEC Monday. Woohoo!
The filing spends a lot of words defining who was eligible to participate, how determinations of Actual Corporate Variable Cash Payments will be made, how Individual Variable Cash Payments will be determined (in theory), and so on. An example:
“Fifty percent (50%) of a Participant’s potential variable cash compensation will be allocated to the achievement of corporate targets (up to a maximum of 200% of the Participant’s corporate target award) and fifty percent (50%) will be allocated to the achievement of individual targets.”
However, our motivation to wade through the verbiage, much less make sense of it, evaporated after we read this one sentence:
“Our Board of Directors and Compensation Committee reserve the right to modify these targets and criteria at any time or to grant additional variable cash compensation to the Participants even if the performance targets are not met.”
Well, then, what’s the point of having any plan at all?
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For the named executive officers they will need to disclose and discuss in the compensation discussion and analysis (CD&A) portion of the 2010 proxy the reasons for deviating from the 2009 variable comp plan.
I assume the BOD doesn’t want to be boxed in by the plan and wants the right to be able to reward effort. For example, the CFO is working nights and weekends for the whole year, really going above and beyond, and they still miss whatever the plan targets are. I am guessing they still want the option to reward NEO’s that are in this situation.
People will complain that executives are overcompensated anyway, yada yada yada. However, if you want to retain the best talent, comp committees need to have the leeway to grant bonuses.