British microchip designer ARC International revealed on Tuesday that its new chief executive has been awarded an incentive package of 10 million share options.
The decision to award the options to Michael Gulett is significant because, unusually, his financial reward is only dependent on ARC's share price rising -- rather than on its performance compared to rival firms. Often in the UK, the size of a senior executive's bonus depends on his company outperforming other companies in its sector.
According to the Financial Times, the package is one of the biggest ever in the technology sector and could prove controversial.
ARC's chairman Jan Tufvesson defended the size of the options package, claiming that it was normal by Silicon Valley standards and insisting that Gulett was being paid the going rate. "It is almost impossible to get a guy with experience," Tufvesson told the FT. "We have been looking since September."
The options can be exercised between 2003 and 2011 and are priced at 45.5p. If Gulett -- who was appointed last month -- can return ARC's share price to the levels it enjoyed in September 2000 then he can look forward to extremely significant remuneration.
At ARC's initial public offering (IPO) in September 2000, its shares were floated at 210p but more than doubled in the first day of trading to close at 428p. Since then, the slump in the tech sector has forced the share price down to around 48p.
If Gulett can get ARC's share price back to the 210p mark, then his options would be worth in excess of £15m.
Such an achievement would be impressive, though, in the light of ARC's recent troubles. Last July it warned that it was expecting to make a loss of £6.6m in the second half of 2001 -- 50 percent worse then previously forecast -- and in August it announced that 20 percent of staff would be made redundant.
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