On The Money Trail

HP disclosed the bonus plan in an amended filing last week with the Securities and Exchange Commission. Approximately $370.1 million will go to HP employees, and approximately $264.4 million will go to Compaq employees, the filing said.

Ten top executives at HP could receive about $33.1 million under a "retention" plan that could give eight of those executives three times their current salary plus target bonus, according to the filing. Seven top executives at Compaq also could earn three times their base salary and target annual bonus, for an aggregate of about $22.4 million.

The biggest chunk of cash, about $337 million, stands to go to about 6,000 midlevel HP managers and key employees. Compaq midlevel managers and key employees stand to make about $242 million.

Steven Hall, managing director at Pearl Meyer and Partners, a New York executive compensation consulting firm, said he has never seen a retention plan that included 6,000 employees. "That's a huge amount of midlevel executives they are trying to protect," he said.

Graef Crystal, a longtime compensation expert, said such bonus plans are not unusual, but he called the amount HP and Compaq have set aside "staggering."

"If you are paying this much money for people to stay, you are in effect bribing them," said Crystal. "This is more money than has ever been paid in history [to keep employees on board at a single moment in time."

HP insiders said that the bonus plan is not out of line, especially considering the complex task of integrating the two companies. The top HP executives eligible to receive three times their current salary and target bonus--payable in two installments on Sept. 4, 2002, and Sept. 4, 2003--are Services President Ann Livermore, CFO Robert Wayman, Computing Systems President Duane Zitzner, Director of Corporate Human Resources Susan Bowick, Imaging and Printing Systems President Vyomesh Joshi, Consumer Business Organization President Pradeep Jotwani, Business Customer Organization President Webb McKinney and Embedded and Personal Systems President Iain Morris. Debra Dunn, HP's vice president of strategy and corporate operations, and Jon Flaxman, HP's corporate controller, are eligible for two times their base salary and target annual bonus.

On the Compaq side, the seven employees eligible to receive three times their current salary,payable in two installments of 50 percent at the completion of the merger and 50 percent one year later,are Executive Vice President of Sales and Services Peter Blackmore, Executive Vice President of Global Business Units Michael Winkler, CFO Jeff Clarke, CTO Shane Robison, Senior Vice President and General Counsel Thomas Siekman, CIO Robert Napier and Senior Vice President of Human Resources Yvonne Jackson.

Glen Jodoin, vice president of operations for GreenPages, a Kittery, Maine-based solution provider, said he is not concerned about the details of the compensation plan. "All I care about is when this [merger is said and done,regardless of whether there is one company or two,that we have strong, healthy partners in place," he said.

"We need them to continue to focus on the value of the solution provider and what we bring to their sales force and the end user."