What's Market: Identifying Benchmarks for Technology Executives

Practical Law Article w-002-2133 (Approx. 6 pages)

What's Market: Identifying Benchmarks for Technology Executives

by Practical Law Employee Benefits & Executive Compensation

Published on 10 May 2016 • USA (National/Federal)

A comparison of certain employment agreement provisions for technology executives from various companies, including The Gap, Inc., Mad Catz Interactive, Inc., and Harte Hanks, Inc. using What's Market, Executive Employment Agreements: Detailed Analysis.

Technology management titles can be misleading indicators of an executive's role. In recent years the C-suite has expanded to include multiple technology executives; however, companies have not adopted a standard hierarchy or set of responsibilities associated with these positions. The ambiguity that can result from overlapping and conflicting roles underscores the importance of conducting a thorough analysis when selecting employment agreement benchmarks.

The blurred distinction between the responsibilities of chief information officers (CIOs) and chief technology officers (CTOs) can be seen in the following comparison:

Paul Chapman is the Executive Vice President, Chief Information Officer of The Gap, Inc., a clothing retailer with an approximate market capitalization of $11.85 billion. His responsibilities include "evolving a traditional IT organization into a cutting edge technology powerhouse that’s embracing the latest processes, technologies, open source tools and agile thinking to drive innovative retail, commerce and enterprise technology across the globe." He shares the C-suite with an executive vice president, digital and customer experience.
Shirish Lal is the Chief Operating Officer & Chief Technology Officer of Harte Hanks, Inc., a customer engagement firm with an approximate market capitalization of $170 million. The executive's responsibilities include "strategic direction, product and technology roadmaps, service delivery, information technology and corporate development." The company also has a CIO that is responsible for "bridging business needs to technology solutions" and "maintaining the stable, secure IT environment."
Andrew Young is the Chief Technology Officer and the only technology executive listed by Mad Catz Interactive, Inc., a consumer goods manufacturer with an approximate market capitalization of $20 million. He has the "responsibilities, duties, and authority customary for such position."

Use the chart below to compare how the responsibilities of these executives corresponds to their compensation.

EMPLOYMENT AGREEMENT	The Gap, Inc. Executive Vice President, Chief Information Officer November 16, 2015	Harte Hanks, Inc. Chief Operating Officer & Chief Technology Officer February 22, 2016	Mad Catz Interactive, Inc. Chief Technology Officer February 5, 2016
ANNUAL RATE OF BASE SALARY	$525,000, subject to review in March 2017. Page 1, Salary	$400,000, subject to increase. Page 1, Salary and Bonus	£160,000, subject to review for adjustment. Section 3(a)
ANNUAL BONUS AND CASH INCENTIVES	Annual target bonus is 80% of base salary, payable based on the employer's or the applicable division's achievement of financial objectives (weighted at 75%) and on executive performance (weighted at 25%), subject to board adjustment. The agreement provides for payment above and below target, up to a maximum of 160% of base salary. The annual bonus will be pro-rated based on active time in position and other changes in circumstances. The executive must be employed on the bonus payment date to receive the annual bonus. Page 1, Annual Bonus	Annual target bonus is 75% of base salary, payable under the employer's annual incentive plan based on the achievement of corporate revenue and operating income objectives. Page 1, Salary and Bonus	None specified. However, the employment agreement states that the executive is eligible to participate in the employer's incentive compensation programs for senior executive officers. Section 3(b)
SIGN-ON EQUITY GRANTS	20,000 restricted stock units, payable under the employer's stock plan, subject to board approval and time-vesting in two equal installments on the second and third anniversaries of the grant date. Page 1, Special Stock Award	Equity awards with a value of $600,000, payable under the employer's omnibus incentive plan as follows: Restricted stock with a grant date value of $210,000, subject to time vesting in three equal annual installments. Non-qualified stock options with a grant date fair value of $150,000, subject to time vesting in four equal annual installments. Performance units with a grant date value of $240,000, subject to a three year performance period ending in 2019. Page 1, Equity	None specified.
ONGOING EQUITY GRANTS	To the extent earned for performance in fiscal year 2015, the executive will receive an award under the employer's performance stock award program with a target value of 75% of base salary for the remainder of fiscal 2015. Eligible to participate in the employer's long-term growth program for the fiscal 2016-2018 performance cycle with a target opportunity to earn performance shares with a value equal to 120% of base salary, payable based on the employer's or the applicable division's financial performance. Earned shares vest 50% on the date that the board certifies achievement of the performance objectives and 50% one year from the certification date. The agreement provides for payment above and below target, up to 300% of target shares. Page 1, Long-Term Growth Program	Beginning in 2017, the executive is eligible for annual equity awards. Page 1, Equity	None specified. However, the employment agreement states that the executive is eligible to participate in the employer's incentive compensation programs for senior executive officers. Section 3(b)
BENEFITS AND PERQUISITES	None specified.	Participation in the employer's comprehensive benefits package, including: Medical and dental plans, jointly paid by the employer and the executive. Employer paid life insurance and accidental death and dismemberment insurance plans. Flexible spending account plans (for healthcare and dependent care) and vision plan. 401(k) plan with an employer match. Long-term disability plan. Educational assistance. 20 days of paid time off per year plus holidays. Reimbursement of COBRA premiums until the executive is eligible for coverage, if applicable. Other benefit plans. Standard perquisites at the executive vice president level, including: Automobile allowance of $975 per month, subject to the employer's right to convert to salary. Option to receive up to 30% of a year's annual incentive payment as restricted stock, subject to one year cliff-vesting at a rate of 125%. Eligible to participate in the employer's nonqualified deferred compensation plan where the executive may defer some or all of base salary and annual bonus. Page 2, Executive Officer Benefits/Perquisites Page 2, General Benefits	Health, welfare and retirement plans, life insurance, disability insurance, flexible benefits arrangements, accident insurance plans, and other non-duplicative benefits for senior executive officers. 160 hours of paid time off per year. For every five years of service, the executive receives an additional 40 hours of paid time off per year, up to a maximum of 240 total hours off paid time of per year. Additional benefits and perquisites that the parties negotiate in good faith. Section 3(b) Section 3(c)

What's Market, Executive Employment Agreements: Detailed Analysis provides summaries for a variety of executive positions and a diverse group of employers, based on size, industry and location. The summaries cover terms that are typically heavily negotiated, such as compensation, severance and non-competition provisions, and often reflect emerging trends.

For additional executive employment agreement summaries, see What's Market, Executive Employment Agreements, which provides a broader sampling of publicly filed executive employment agreements summarized at a higher level. Each detailed summary contains a link to the underlying publicly filed executive employment agreement.

What's Market: Identifying Benchmarks for Technology Executives | Practical Law