April 25, 2018
Compensation is up sharply for CEO James Cracchiolo to $23,900,309. Last year a regression conducted by HIP Investor last year found an excess pay level of over $3.6 million and that was when TDC was $16.6 million. Cracchiolo was number 47 in our list of overpaid CEOs, and seems likely to appear on the list again.
Yet the $23 million reported in the summary compensation table was only a portion of the money he took home in 2017. Cracchiolo exercised over half a million shares of options, realizing nearly $41 million dollars in value. In a past blog on Ameriprise I wrote: “Options can create windfalls for executives based on market forces they do not control. Ameriprise option grants from 2008 had strike price of $52.86, the options granted in 2009 had a strike price of $21.34 cents. This obviously reflects the financial crisis.”
Cracchiolo has benefitted tremendously from being in the right place at the right time.
Despite growing shareholder frustration with options, particularly with the sort of option churning seen at Ameriprise, the company defends the practice: “The [compensation] committee does not consider gains or losses from long-term and equity incentive awards made in prior years, such as stock option exercises and restricted stock vesting, in determining new incentive awards.”
The proxy further states that, “The committee believes that reducing or limiting current stock option grants, restricted stock awards or other forms of compensation because of prior gains realized by an executive officer would unfairly penalize the officer for high past performance and reduce the motivation for continued high achievement.”
Five years ago Cracchiolo owned 322,506 shares of stock, and had the right to acquire 2,544,300 shares, according to the “Ownership of Common Shares” chart in the 2013 proxy statement. The same chart in the most recent proxy statement shows that he now owns only 189,274 shares, and has the right to acquire 775,347 shares. One doesn’t have to be a whizz at word problems to see that he has reduced his ownership stake while reaping millions. The claim that his motivation to do his job rests on additional grants that are incremental to his total wealth accumulation underscores the farce that is U.S. executive compensation in 2018.