What goes into calculating the mega-million paycheques of tech CEOs?

Working out what the boss is really worth - from $84.3m for Microsoft CEO's to $1 for Facebook chief

How much should tech CEOs get paid? Who should decide the question anyway?

That last question is the easiest to answer - it's the shareholders or, in the case of a private company, the corporate owners who decide.

To answer the other questions, we start by looking at how much some CEOs get paid. This question caught the public imagination recently when it emerged that if he performs well, Microsoft CEO Satya Nadella, will receive a hefty $84.3m paycheque.

Nadella's base salary for the financial year 2014 (the most recent whole year) was $918,917, but various other cash and stock awards resulted in a total payout of $11.6 m for the year. So to get a raise of more than $70m in a year, if he hits his targets, is a big jump indeed.

There is some mitigation - a large part of the Satya's compensation is performance-based and to get the full whack, Microsoft has to outperform 60 percent of the S&P 500.

Big paydays all around

So how does the Microsoft CEO's salary compare to that of other tech chiefs?

IBM's Ginni Rometty made $16.1m in 2012 (IBM is a third larger than Microsoft).

HP's Meg Whitman was paid almost $15.4m in total compensation in fiscal 2012, her first full year as CEO. In December last year HP raised her salary from a nominal $1 to $1.5m although much of her pay will come in stock.

In contrast Yahoo CEO Marissa Mayer may earn more than $20m a year based on salary and equity awards, plus $200m over five years based on performance.

At the other end of the spectrum, the $1 salary is in vogue too.  In April, Facebook's Mark Zuckerberg decided that he would pay himself only $1 in salary: not too much of a hardship for a man who is rated the 22nd richest in the world thanks largely to his stockholding of around $35.3bn. Google CEO Larry Page and his longtime partner Sergey Brin were also in the $1-a-year salary club, though they were more than well compensated with stock options between $20bn and $30bn.

Who is the 'nominal' salary good for?

The practice of CEOs taking a nominal salary can be good for staff morale. "For the more astute CEO, they will essentially put skin in the game," said Quocirca analyst Clive Longbottom. "By eschewing a fancy salary and going for share options, they are essentially saying 'my future is your future'."

The CEO has to make "all sorts of decisions – some positive, some very hard on other people in the organisation," he points out. A big problem for corporate leaders is facing down the short-term priorities of investors and the markets - to be good at what they do the CEO has to be, "far more of an 'Executive' officer than an 'Operations' officer," Longbottom said.

But the skills required to be a CEO who can turnaround a company or create a period of strategic growth, "are not the same as those required to run an organisation sustainably," Longbottom believes. "This is where a mixed package with a slight weighting towards salary is probably preferable."

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