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Executive Sweet Compaq's recently-released proxy statement reveals that company performance and shareholder value rank high in the firm's executive compensation scheme. According to the proxy, CEO Michael Capellas last year received a salary of $850K and a bonus of $1M. He also received 200K shares of Compaq restricted stock awards worth $5M, and 1.8M stock options. The stock options, which expire throughout 2009, could be worth as much as $70M if Compaq's share value rises 10 per cent in each year. The restricted stock awards vest on Capellas' fifth anniversary as CEO, but will vest earlier if Compaq's stock climbs out of the cellar. 50K shares will vest as soon as Compaq's stock trades at $35 per share for 30 consecutive trading days; another 50K will vest if the stock trades at $40 for a month; and the final 100K will vest if the stock trades at $50 per share for at least a month. Capellas' assumption of the CEO title dramatically improved his financial fortunes. In his role as CIO, Capellas in 1998 received a salary of $400K, a $200K bonus, and 200K stock options. Ousted CEO Eckhard Pfeiffer in 1998 received a salary of $1.5M, a bonus of $3M, and 875K stock options. During his four month tenure as CEO during 1999, Pfeiffer received $1M in salary plus a $6.4M separation payment and $3.4 long-term bonus. At age 65, Eck will be eligible for a $560K annual pension. Taken in conjunction with the erstwhile CEO's 13.4M exercisable stock options, it's obvious that Eck will be able to continue in his role as the epitome of tonsorial perfection. Capellas' compensation scheme is far less generous, but it reflects a new performance-based incentive plan that the CEO has implemented for all senior executives. For example, newly-hired CFO Jesse Greene will receive a base annual salary of $550K and a first-year cash bonus that will range from $550K to $1.375M, based in part on the company's success in meeting performance targets. Even Compaq's rank-and-file employees can profit from the firm's success, albeit on a much more modest scale. Compaq last December awarded each full-time employee a one-time option of 200 shares. Compaq's first-ever across-the-board dispensation of stock options is designed to give employees an incentive to remain employed at Compaq and to redouble their efforts to improve shareholder value. Compaq will hold its stockholder meeting on March 27, 2000 in Houston, Texas. ®

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