Intel makes it harder for Gelsinger to earn Beaucoup bucks • The Register

Intel is making it harder for CEO Pat Gelsinger to earn a significant portion of his compensation package, even as a falling stock price puts such awards increasingly out of reach.

The x86 giant on Tuesday announced changes to how and when Gelsinger can receive payouts from the performance-based stock awards for new hires, which he was granted following his appointment as CEO in February 2021. The changes were set out in an 8-K filing with the US Securities and Exchange Commission.

The changes, among other compensation changes for top executives, were enacted in response to a sharp rebuke from investors earlier this year over the pay practices of Intel’s top executives. Shareholders had voted almost two-to-one against the compensation packages for the chipmaker’s top executives. Although it wasn’t binding, Intel said at the time it was taking the vote seriously.

In general, the changes to Gelsinger’s performance-based stock awards for new hires have increased “stock price performance hurdles for certain awards” while “extending the period over which stock price performance hurdles must be maintained,” according to the SEC filing.

In order for Gelsinger to exercise his performance stock options, he must now increase Intel’s stock price by 50 percent — instead of the original 30 percent — over a five-year period after receiving the options. Additionally, Intel’s stock price must be above that 50 percent threshold for 90 days instead of the original 30 days for Gelsinger to receive the payout.

For its strategic and outperformance stock units, Intel has removed Gelsinger’s ability to receive payments on a portion of the awards on the third anniversary of the grant date, meaning he must now wait the full five years from that date to vest them. The company also extended the period during which the stock price is above the applicable thresholds for each award from 30 to 90 days.

To outline how this makes it difficult for Gelsinger to receive payouts for these awards, let’s assume that Intel’s stock price closed at $29.67 today. That’s less than half of the $61.81 stock price Intel had when Gelsinger became CEO in February 2021.

That means Gelsinger really has to work magic to absolutely excite shareholders in order for him to earn his performance-based stock options, which assumes Intel’s stock hits at least $74.47 in a couple of years. In order to transfer its stock units, Intel’s share price has to go even higher, at $148.95. And stocks need to be held at that level or higher for three times as long.

Investors weren’t pleased with how expensive Gelsinger’s comeback plan is for Intel, given all the new factories and expensive manufacturing investments it entails. He has promised that by 2025 the company will surpass the Asian foundry giants in advanced chip manufacturing capabilities, meaning Intel will have little time to boost its share price before the grant period ends next year. ®