· His employment contract is for 5 years.
· His base salary is US$1,250,000 pa, to be reviewed annually
· His on-target annual bonus is 150% of his base salary ($1,875,000) with a maximum of 300% of base salary ($3,750,000).
· Grant of Long Term Stock Options for shares with a value equivalent to 280% of his base salary. This means that for the year beginning 1 April 2012 (CSC’s FY2013) the value of the shares covered by the option agreement will be $3,500,000.
· Grant of Performance Share Units with a value equivalent to 420% of his base salary. Thus for FY2013 the value of the shares covered by the Performance Share Units agreement will be $5,250,000.
· Grant of Time Vesting Inducement Restricted Stock Options (ie “Golden Hello part 1 ”) of 200,000 shares vesting evenly over 4 years. At a current price of $30 per share the value of the shares covered by this agreement would be $6,000,000.
· Grant of Performance Vesting Inducement Restricted Stock Options (ie “Golden Hello part 2 “) of up to 200,000 shares. These options will vest based upon the increase in CSC’s share price over the coming 5 years. The maximum award would vest in the event of a share price increase of 80% over its current price. With a current price of $30 per share the value of the shares covered by this agreement would be up to $6,000,000.
· An annual grant of an unspecified number of Career Shares,
· Benefit Programs such as pension and other perks.
· Various provisions regarding termination of employment, change of control of CSC , confidentiality agreements, indemnification in case of litigation or claims against him in his role as CEO of CSC etc.
It is a rich package. However, Mike Lawrie is taking on the challenge of turning round CSC from the road to oblivion that Mike Laphen has driven it down. If Lawrie succeeds, his compensation and rewards will be good value for both shareholders and employees.
The Board of Directors who have selected Mike Lawrie as CEO and approved this compensation package also selected Mike Laphen as CEO and then designed his compensation package. Laphen’s failure as CEO was foreseeable in view of his management style. His compensation package was flawed in that he earned significant “performance awards” in bonus and stock options despite major shortfalls against targets. This led to his earning $15.5million in FY2010 and $12.5million in FY2011 while investors lost money and employees lost their jobs. More details are in our blog posting of 30 June 2011 “CSC’s idea of pay for performance“.
We trust the CSC Board of Directors has learned the lessons of their errors regarding Mike Laphen. We hope they will ensure Mike Lawrie is well compensated for success, but there will no longer be massive rewards for CEO failure.
For full details of Mike Lawrie’s employment agreement, see
posted by Little John