SAN FRANCISCO (AP) — Motorola's new co-chief executive was rewarded with a pay package valued at more than $100 million in 2008, according to the struggling cell phone maker's proxy filing Tuesday. But almost all of that consists of stock awards that will be worthless absent a major recovery in Motorola's stock price.
Sanjay Jha's compensation is made up of huge incentives the Schaumburg, Ill.-based company said it needed to offer to recruit an executive of his caliber to help lead a major restructuring effort. It comes as thousands of Motorola employees have been laid off because of mounting losses.
Jha was lured to Motorola last year from Qualcomm, where he served as COO. He was brought in to run Motorola's badly wounded cell phone business, which the company plans to spin off but has been delaying because of its huge losses.
Jha, who leads Motorola's mobile devices division, has a big job ahead of him: Motorola's cell phone business has eroded sharply as its hit Razr phone has fallen out of favor, the recession crimps consumer spending on new gadgets, and the company scrambles to cut costs to keep pace.
Motorola's cell phone revenue has dropped 70 percent in the past two years, and the company has announced 7,000 job cuts over the past six months. The company as a whole lost $4.16 billion last year, as sales slid 18 percent to $30.1 billion. Both Jha and the company's other co-CEO, Greg Brown, said in December they would forgo any 2008 bonus, given Motorola's overall poor performance.
The total value of Jha's 2008 pay package was $104.4 million, according to calculations by The Associated Press.
That figure includes a base salary of $484,615 and $412,096 in perks such as personal use of the company aircraft, a chauffeur, relocation expenses and company 401(k) matches. But nearly all the rest of his pay package came in the form of restricted stock and options worth $103.5 million on the dates they were awarded to him.
Motorola said in its executive-compensation filing Tuesday with the Securities and Exchange Commission that a big part of Jha's compensation consisted of shares of restricted stock and options to make up for similar awards he gave up when he left Qualcomm.
Motorola said about 60 percent of the value of his "make-whole" awards are in the form of stock options that won't be worth anything unless the company's stock price goes higher.
Jha was awarded 10,211,226 of those options, which have an exercise price of $9.82. That was Motorola's closing stock price on August 4, the date the options were awarded. Jha also received 6,383,658 in "inducement" options and about 3.67 million restricted shares that carry the same exercise price.
But shares have slid sharply since then, closing at $3.30 on Tuesday. That means the stock would have to triple before Jha can make money off the awards.
Jha was also promised a big payday if the spinoff of the mobile devices business doesn't go through. If that division doesn't become a separate, publicly traded company by October 31, 2010, Jha would forgo a promised equity award and instead get $30 million in cash.
If the division does become a separate, publicly traded company, all of Jha's outstanding equity awards in Motorola's common stock convert to equity awards in the new company's common stock, Motorola said in its filing.
Motorola's other co-CEO, Brown saw the value of his pay package more than double from 2007 to 2008.
In 2008, his compensation was valued at $24.2 million, a 149 percent increase from the $9.7 million pay package he got in 2007. But like Jha, the majority of Brown's pay package came in the form of $22.6 million of stock options and restricted stock that will be worthless without a large increase in Motorola's stock price.
The Associated Press calculations of total pay include executives' salary, bonus, incentives, perks, above-market returns on deferred compensation and the estimated value of stock options and awards granted during the year. The calculations don't include changes in the present value of pension benefits, and they sometimes differ from the totals companies list in the summary compensation table of proxy statements filed with the SEC.
Motorola plans to hold its annual meeting on May 4 in Rosemont, Ill.
In a separate filing Tuesday, it said it will submit a proposal to shareholders at the annual meeting to approve a one-time stock option exchange program for some employees.
The company said many of its workers hold outstanding stock options that were granted when Motorola shares traded much higher, but now are "underwater," given that the exercise price is well above the stock's current price.
The company said it is proposing to offer a one-time opportunity for eligible employees to voluntarily swap certain of their stock options for fewer replacement options with a lower exercise price and new vesting schedule. Members of Motorola’s senior leadership team would not be eligible to participate.