Intel revealed details of new CEO Pat Gelsinger’s pay package for the first time Wednesday, reporting the full value of the hiring bonus that lured him away from his prior job running software maker VMware.
Intel valued Gelsinger’s compensation last year at an astonishing $179 million, well above the $116 million it initially reported when it announced his hiring in January 2021. The difference results from changes in Intel’s share price between Gelsinger’s hiring announcement and start date, according to Intel, which inflated the estimated value of his stock grants.
The vast majority of Gelsinger’s pay is in the form of one-time stock awards associated with his hiring, and Intel said most of it depends on “significant” appreciation in the chipmaker’s market value – an uncertain proposition, given his risky plan to revive Intel’s manufacturing and engineering prowess.
Since hiring Gelsinger, Intel has committed close to $90 billion to build new factories in Arizona, Ohio and Germany. Gelsinger has warned shareholders that the spending spree will depress profit margins for several years.
Intel shares had risen sharply in the weeks between the time Intel announced Gelsinger’s hiring and when he started work, reflecting investor enthusiasm for him. But they have fallen in the past year as investors grew increasingly concerned about his spending plans.
That decline cost Intel about $40 billion in market capitalization. The company’s market value is now $213 billion. Many of Gelsinger’s stock payouts depend on major increases in Intel’s market capitalization over time, ranging from $61 billion to $403 billion.
Those stock options and grants are structured to be worthless to Gelsinger without an enormous turnaround in Intel’s share price.
Intel’s stock has fallen from $61.81 when Gelsinger started work in February 2021 to around $52 a share in early trading Wednesday.
An evangelical Christian, Gelsinger has said in the past that he donates about half of what he earns to charitable groups, mostly faith organizations. Intel said Wednesday he has pledged to increase that percentage by 1% annually.
Past recipients of Gelsinger’s philanthropy have included William Jessup University, Stadia, Missions of Hope International, Mercy Ships and the Oregon-based Luis Palau Association, according to Intel.
Intel is Oregon’s largest corporate employer, with 22,000 people assigned to its Washington County campuses. Though Gelsinger lived in Oregon for many years, he now works at Intel headquarters in Silicon Valley.
In its annual report to shareholders Wednesday, Intel said it did not hear requests from shareholders that it change Gelsinger’s pay structure. But it said “some stockholders sought to understand the need for the magnitude of the CEO’s new-hire equity awards,” and so it provided “enhanced disclosure” of its rationale for Gelsinger’s payout.
Intel’s board said his pay package reflected the “limited pool” for technical leadership and Gelsinger’s experience running a publicly traded tech company. And it said nearly half of his stock awards were designed to compensate him for payouts he forfeited by leaving VMware.
Gelsinger, 61, spent the first 30 years of his career at Intel – much of it working in Oregon – before leaving in 2009. He was VMware’s CEO from 2012 until Intel lured him back last year.
For 2021, Intel reported that Gelsinger earned 1,711 times more than the median employee, a disclosure required by the U.S. Securities and Exchange Commission. That would be among the largest CEO pay ratios among major U.S. companies.
So Intel provided a “supplemental” pay ratio that excludes the one-time stock and cash awards associated with his hiring. Absent those payouts, Intel valued his compensation at $28.8 million – 276 times the median employee pay.
Nike, for comparison, paid CEO John Donahoe nearly $33 million in stock, salary and benefits in its last fiscal year. That’s 913 times what the Oregon company’s median worker received.
For 2022, Intel said it has “reverted to its historical approach to annual executive compensation.” It said Gelsinger’s pay this year has a target value of $26.3 million, mostly in stock awards that depend on the performance of Intel shares.
Former CEO Bob Swan, whom Gelsinger replaced, received $22 million in compensation in 2020, his last full year on the job.
-- Mike Rogoway | mrogoway@oregonian.com | Twitter: @rogoway | 503-294-7699
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