IBM CEO Sam Palmisano's total compensation--including salary, bonus and stock awards--was $24.46 million in 2006 and that sum could rise if he hits performance targets.
That sum was outlined in excruciating detail by Big Blue in its proxy filing with the Securities and Exchange Commission. New SEC rules require companies to detail every tidbit of executive compensation--stock, pensions and perks--and offer some insight on how the company came up with its figures. The SEC's goal: Eliminate egregious perks and pay. For a company like Big Blue that's not an issue since "at IBM, 'perks' for executives are relatively few and quite basic. The value of these programs makes up less than 1% of any IBM leader’s total compensation."
Among other top execs at IBM, Mark Loughridge's total 2006 compensation was $5.95 million; Nick Donofrio, executive vice president of innovation and technology, made $6.3 million; Doug Elix, senior vice president of sales and distribution, brought home $6.06 million and Steve Mills, senior vice president of IBM's software group, made $6.01 million.
The actual figures, however, are just a sideshow to the rest of IBM's proxy. The proxy goes into a lot of detail about why those executives make what do.
IBM said it figured out what its executives should be paid by surveying compensation across a list of large companies including AIG, Altria, Boeing, Disney, Hewlett-Packard, Intel, Lockheed Martin and Wells Fargo. About 87 percent of a year's compensation is based on business performance.
Palmisano received $5 million in annual incentives for hitting financial metrics, maintaining IBM's market position in systems, middleware and services, growing emerging markets, rolling out productivity initiatives globally, creating a new leadership model, improving employee satisfaction and innovating.
Other executives also had similar themes to justify their respective compensation levels. For instance, IBM noted that Loughridge "managed IBM's portfolio" and improved or divested businesses that "sub-optimize value." Donofrio "drove process transformation and standards" across IBM, "closed 14th consecutive year of patent leadership" and "drove advances in high-performance computing."
In addition, Elix improved worldwide satisfaction ratings and Mills landed a bevy of acquisitions.