Report: Sun and IBM clashed over executive pay

The breakdown in talks between IBM and Sun came down to a couple of key disputes, one of which involved millions of dollars in payouts to Sun executives, according a Bloomberg report that cites unnamed sources.

CEO Jonathan Schwartz and Chairman Scott McNealy each have contracts that have clauses that call for them to receive three times their annual pay - made up of salary and bonuses - in the event of an acquisition.

Also see: The IBM-Sun saga: Can McNealy let go? Should he?

Last year, Schwartz received $7.7 million in compensation while McNealy received $6.45 million, according to Bloomberg. The deal would have also required other executives to receive 2.5 times their regular salary, as well as health benefits for two years and other awards.

Talks broke down over the weekend and now Sun, which is being criticized as making "a horrible mistake" by allowing the deal to crumble, is on the hot seat to find a new suitor as it continues to face losses intensified by poor economic conditions.

Also see: Sun following the IBM deal collapse: Customer confusion en route

There were also disagreements over the per-share price, as well as the amount of control that IBM would have over Sun before the close of the deal, sources told Bloomberg.

There are no meetings between the two companies scheduled for today.