NYT Targets Ariba's Executive Compensation
Courtesy of The FMKT Yahoo alumni board (which now counts 400 members), I learned of a piece in the NY Times this weekend targeting Ariba's CEO compensation. The piece opines that, "Among the companies that pay too much is Ariba Inc., a software concern in Sunnyvale, Calif. Its chief executive, Robert M. Calderoni, received $10.4 million in total compensation --including $7.6 million in restricted stock -- in the fiscal year that ended last Sept. 30. That was a 75 percent increase from 2004." The piece goes on to criticize Bob's compensation given Ariba's continued losses. But it fails to point out that on a cash basis, Ariba has been making money in recent quarters (a huge change from the days when Bob took over). Still, by my estimates, Bob is making roughly 5x to 10x what a top managing partner would make in a global consulting organization selling similar services -- but not software -- to Ariba. The CEO compensation of other similar-sized software company is all over the map based on company performance, making direct comparisons more challenging.
- Jason Busch
- Jason Busch
Articles like this always baffled me. Sure the New York Times commentator feels like he's writing something with a tinge of "scoop" but my issue when it comes to executive compensation is...let the investors decide. Ultimately as a shareholder I have the right to directly (by voting my proxy) and indirectly (but lobbying to fellow investors and the board via activist exercises) to fight against what I believe to be unfair compensation.
And like all public companies, if I can't generate enough support from my fellow investors to correct what I deem an injustice, I have the option of selling my shares and moving on.
I'm not an Ariba shareholder but if I were, I would ask myself, has Bob Calderoni's presence altered the valuation of Ariba in a signicant manner (thus making my holdings worth more). If the answer is "YES", then I ask myself to what degree should he be rewarded.
This is no different (good or bad) than some of the egregious stock options grants we have seen (and are still seeing) in tech companies throughout the world.
Ariba investors have accepted this poor investment performance ride for 4+ years, and all indications are that they are content to stay in bad stock for another 4 years. Solutions aside, the company is a bad investment, and is tarnishing the space. Do you really think that Bob has a vision that can inject dramatic growth into this company? Why would your money perform any better in Ariba in the next 12 to 18 months?
As an investor you have to know when to cut your losses, and if you do not want market beating returns, you should at least demand to beat the rate of inflation - else it is a money loser in *very* real terms. Ariba's investors seem to not care. "A fool and his money are soon parted..."
(Spend Fool, care to chime in, that was your queue)