Tuesday, April 25, 2017


"IBM says CEO pay is $33 million; others say it is far higher" by Anders Melin Bloomberg News  April 24, 2017

NEW YORK — When IBM shareholders gather Tuesday, they will be asked to sign off on a $33 million pay package for chief executive officer Ginni Rometty.

It’s a hefty sum for any CEO, let alone one who’s overseen five years of falling revenue and left shareholders with a total return of less than 0.1 percent.

And the figure might understate her actual compensation — perhaps by 50 percent or more, because of the way IBM values her stock options.

According to proxy adviser Institutional Shareholder Services, Rometty’s 2016 package may actually exceed $50 million, based on its own estimate for the value of her options at the time they were granted.

Independent calculations by Bloomberg News also suggest that at current values — which take into account the rise in IBM’s share price since the grant — her compensation is now worth $65 million. This disparity reflects the imprecise art of valuing stock options.

Because of variations in how options are valued, awards disclosed in regulatory filings can appear smaller than they really are. While it’s legal and even fairly common, the particulars of Rometty’s case have raised more than a few eyebrows.

‘‘Their valuation is very unusual,’’ John Core, a professor of accounting at MIT’s Sloan School of Management, said of IBM. ‘‘There’s certainly a measure of discretion in these models, although this seems to be on the more extreme side.’’

Ed Barbini, a spokesman for IBM Corp., said the Armonk, N.Y., company has used the same method to value option grants for more than a decade, in accordance with generally accepted accounting principles and Securities and Exchange Commission regulations.

Neither Rometty nor the directors responsible for setting her pay were available to comment.


Nothing illegal, just looks bad.