Intel said Tuesday it has reduced potential stock payouts for CEO Pat Gelsinger after fielding complaints from investors. The cuts come as employees are bracing for layoffs across the company, part of a broader plan to reduce corporate spending.
The compensation changes reflect a desire “to further strengthen the alignment of Mr. Gelsinger’s new hire performance-based equity awards with his commitment to long-term stockholder value creation,” Intel said in a regulatory filing Tuesday.
In practice, though, the reforms could be mostly symbolic because Intel’s declining share price may have put many of Gelsinger’s stock awards out of reach.
Intel lured Gelsinger away from his job running software maker VMware last year with a compensation package valued at an extraordinary $179 million. Nearly all of that value came in stock bonuses Gelsinger would only receive if the company’s share price climbed.
In practice, the opposite has happened. The stock has fallen from $61.81 when Intel hired Gelsinger in February 2021 to $29.15 in early trading Tuesday.
Investors have fled Intel in part because of the exorbitant cost of Gelsinger’s turnaround plan. He has committed to spend $60 billion building new factories in Arizona, Ohio and Europe, and billions more to revive Intel’s engineering capabilities.
Even as Intel embarks on a building binge, the company’s sales are in steep decline because of reduced demand for PCs and intense competition from rival chipmakers. Intel has begun laying off staff as part of a plan to save $3 billion next year, and billions more in future years.
Intel has acknowledged that investors were unhappy with Gelsinger’s outsized potential payouts, noting earlier this year that “some stockholders sought to understand the need for the magnitude of the CEO’s new-hire equity awards.”
On Tuesday, the company said it had revised Gelsinger’s new-hire payouts to make them more difficult to achieve. For example, to receive some performance-based stock options the company’s share price must increase to $74.47 instead of $64.54, as originally required. And the stock must stay above that higher threshold for 90 consecutive days, instead of 30 days.
Intel said it is making other reforms to its executive pay practices “after careful review and deliberation of the feedback Intel received from its stockholders during extensive engagement regarding the company’s core compensation programs and disclosures.”
Intel said Tuesday it will limit cash bonuses, require performance payouts be based on multiple years of strong performance and won’t use stock price as the sole basis for future hiring bonuses, among other changes.
Separately, Intel announced Tuesday that it had appointed Barbara Novick, co-founder of the investment firm BlackRock, to its board. And trade publication The Register reported that Randhir Thakur, head of Intel’s new contract manufacturing business, will leave the company early next year.
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