April 11, 2003 11:53 AM PDT

Amazon CEO skips raise, bonus

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Amazon founder and CEO Jeff Bezos passed up a pay raise and bonus for a fifth straight year, but he managed to cash in on millions of dollars in options, according to the company's proxy filed Friday with the Securities and Exchange Commission.

Bezos, along with other company founders such as Apple Computer's Steve Jobs, often hold large stakes in their companies and, as a result, decline traditional salary increases, bonuses or both. But over the years, Bezos has seen his ownership stake fall. For example, it was 27.6 percent last year, down from 41 percent in 1998.

As with other chief executives, a large percentage of Bezos' compensation comes from exercising options. Bezos exercised $7.3 million in options last year, according to Friday's filing. And at the end of the year, he had $5.3 million in options he could have exercised and $13.2 million in options that have yet to vest.

Executive stock option grants are among the hot issues for shareholders these days, not only in the tech sector but also across a range of other industries.

One Amazon shareholder, the International Brotherhood of Electrical Workers' Pension Benefit Fund, has submitted a proposal on the topic. The pension fund is asking investors to approve a stock option proposal at Amazon's annual shareholders meeting on May 28 that calls for linking the exercise price of executives' options to an industry performance index of Amazon's peer companies.

"Implementing an indexed stock option plan would mean that our company's participating executives would receive payouts only if the company's stock price-performance was better than that of the peer group average...(rewarding) participating executives for outperforming the competition," the pension fund stated in the proxy.

Amazon's stock, on a cumulative total return, outperformed several indexes and peer groups last year, according to the proxy. Based on a $100 investment in 1997, Amazon's value would have been $376 at the end of last year. A similar investment in the Morgan Stanley High Technology Index would have been worth $129 and the Nasdaq Total U.S. Index $86.

Amazon's board, however, is against the shareholder proposal, saying it would restrict its strategies for executive compensation.

Corporate boards are under increasing pressure from shareholder initiatives these days, in the aftermath of the Enron and Worldcom meltdowns. Hewlett-Packard, for example, saw two shareholder initiatives pass recently, despite its opposition. One limited the board's authority to issue large severance packages to executives, and the other required shareholder approval before establishing antitakeover policies, such as a "poison pill."

 

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