EMC Chairman’s Pay Doubles to $29.8M

By Hiawatha Bray, The Boston Globe

Mar. 21–EMC Corp. chairman and chief executive Joseph Tucci more than doubled his compensation last year, largely through a grant of stock in the industry-leading data storage company, which saw dramatic growth in sales and profits in 2005.

Tucci’s 2005 compensation package, which totaled $29.8 million, included $22.8 million in restricted stock that Tucci will receive if the company reaches a series of profit goals during the next three years.

Aaron Rakers, a financial analyst who tracks EMC for A.G. Edwards & Sons in St. Louis, called the size of Tucci’s stock grant “a little hefty.” But he hailed EMC’s performance under Tucci. EMC boosted sales by 17 percent and profits by 30 percent last year, earning $1.13 billion.

“They fundamentally have turned that company around tremendously over the past three years,” Rakers said.

Tucci’s base salary for 2005 remained unchanged at $1 million, but he collected a $2.15 million bonus, compared to a 2004 bonus of $1.9 million. The EMC chief received 700,000 stock options last year, down from 1.1 million options in 2004.

Tucci will have to guide EMC to a cumulative three-year increase in earnings per share to collect a million shares of restricted stock in January 2009. He also stands to pick up as many as 350,000 shares by meeting earnings targets in each of the next three years, and he can receive an additional 250,000 shares in 2010 by beating the earnings targets.

“They’re intended to drive performance,” said EMC spokesman Greg Eden, “and they promote executive retention.”

Eden would not provide specific information about the targets Tucci needs to meet.

The move from options to restricted shares could be driven in part by the lackluster performance of EMC stock. The company’s shares declined in value by 7.5 percent during 2005, making it relatively unattractive for EMC executives to cash in their options.

But Rakers said EMC is probably reacting to new accounting rules that require companies to treat stock options as an expense.

“The use of restricted stock is something you’re going to see a lot more of going forward,” said Rakers. “They’re going to curtail some of the option grants they’ve done historically.” Rakers’s firm, A.G. Edwards & Sons, provides financial services to EMC.

EMC has increased its revenue from sales of data storage management software. The company has also launched new products aimed at small- and medium-sized businesses to complement its dominant position in high-end storage systems.

“It’s the type of thing that a lot of large companies have fumbled and EMC has actually executed phenomenally well in that respect,” said David Freund, a storage industry analyst for Illuminata Inc. in Nashua.

Despite this, EMC shares have continued to languish. Freund said it’s probably because many investors don’t care about EMC’s strategic plan, just it’s short-term performance. “The stock market tends to be slow in responding to things a company does that have long-term strategic value,” Freund said. “The event horizon for Wall Street is generally the quarter.”

Yesterday EMC shares rose 23 cents to $14.33 on the New York Stock Exchange.

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