Scott Thurm checks in on proxy season and is pleasantly surprised.
Investors and corporate executives should study Intel‘s discussion of executive compensation in its annual proxy, out today. The world’s largest semiconductor maker sets a standard for disclosure that demonstrates what’s possible, and how far short most companies fall. Intel goes beyond the Securities and Exchange Commission’s new rules in several important respects, giving investors a fuller picture of how executives are compensated, and allowing them to make more meaningful comparisons to other companies and past years.
For example, Intel includes executives’ 2005 and 2004 compensation along with their 2006 compensation; the SEC doesn’t require this, because it changed the rules for how to disclose 2006 pay. But Intel tells investors how much executives made in 2005 and 2004 using the SEC’s new math. CEO Paul Otellini‘s total compensation declined 20%, to $9.8 million, partly because of a quirk in Intel’s pension plan, but also because Intel gave smaller equity grants and slashed bonuses by an average of 40% to reflect its weaker financial performance.
Intel goes above and beyond in other ways too: It provides the total compensation for the five top officers, giving investors a peek at what the top brass is making as a group; it discloses the value of each equity grant, and how it is apportioned to an executive’s annual compensation under the SEC’s new rules; and it discloses the assumptions used to calculate the value of each grant.
Beyond the disclosures, Intel breaks with U.S. corporate custom in how it compensates executives. It specifies that it sets base salaries below the 25th percentile of its peer group; most companies say they need to pay at the median, or higher, to attract top-flight talent. And Intel has no executive perks: no personal travel on the corporate jets, no special health plan, no country-club memberships, and no special provisions to pay the taxes for all the extra benefits.