WHO WERE THE BIGGEST EARNERS AT DELL EMC?
Three who came from EMC Corp. topped list with large stock awards.
The highest-paid executive at Dell Technologies last year wasn’t company founder and CEO Michael Dell.
That prize goes to David Goulden, the president of server-and-storage division Dell EMC.
Goulden earned $24.9 million in fiscal year 2017, according to filings with the U.S. Securities and Exchange Commission, with the majority of that compensation coming from various stock awards that were tied to Dell’s $58 billion purchase of EMC Corp. Dell’s fiscal year ended Feb. 3.
By comparison, the other two executives who joined Dell Technologies’ leadership team from EMC, Jeremy Burton and Howard Elias, earned about $13 million last year, with the bulk of their compensation coming from stock.
Dell valued those stock-based awards based on the day they were granted, so it’s an estimate because their value can change depending on when an executive actually receives them and they convert to full stock ownership.
Meanwhile, Michael Dell was paid $3.3 million last year, and Chief Financial Officer Thomas Sweet earned $3.9 million. The bulk of their compensation came from one-time bonuses. Their executive pay was released by Dell as required by SEC rules; only the five highest earners at a company have their pay details publicly disclosed.
Dell Technologies is a privately run company that has a publicly traded tracking stock called DVMT, which is designed to represent the company’s economic interest in software company VMware. The stock-based compensation that Dell Technologies awards its executives are “Class C” shares, and is not affiliated with the tracking stock.
The value of those shares is set by a third-party firm, Houlihan Lokey. As of this month, according to filings with the SEC,
‘There are many different approaches to founder-CEO pay. We’ve seen them all — we see fullmarket competitive pay, people making $20 to $20 million a year as founders.’ Todd Sirras Semler Brossy compensation expert
these shares were valued at about $30. The value of a private company is typically determined by analyzing its financial statements, transactions and studying similar publicly traded companies, according to compensation expert Todd Sirras with Semler Brossy.
It’s common for executive pay to be tied to stock because it’s a way to incentivize an executive toward improving the long-term performance of a company.
Dell Technologies issues stock units, essentially a promise to deliver stock at a later date that vests either on a time schedule or based on certain performance measures.
The company also issues stock options, which allow for an executive to buy stock at a predetermined reduced price.
In the big picture of executive pay, Dell executives are nowhere near the top of the list. According to a Bloomberg analysis, Apple CEO Tim Cook took home $150 million last year, making him the second-highest paid CEO in the United States.
How executive pay is calculated can vary, depending on how stock-based compensation is valued.
It can be misleading to focus on stock options or units granted in a single year. For instance, it appears that Goulden earned seven times as much as the company’s CEO in 2017, which is technically true. But Michael Dell is sitting on millions of stock options that, as of this month, are worth about $800 million. Some of these options could be exercised right away. And Michael Dell outright owns “Class A” shares worth about $30 billion.
For founders, who often have a large amount of equity in their company, they may not need to be enticed with more stock-based compensation. Michael Dell’s equity stake in the company is worth about $30 billion, according to an American-Statesman analysis.
“There are many different approaches to founder-CEO pay,” Sirras said. “We’ve seen them all — we see full-market competitive pay, people making $20 to $20 million a year as founders. And we see people take a dollar because they have $30 billion worth of stock already and they are already motivated.”