IBM chief suffered only modest pay cut

March 16, 1993|By Ian Johnson | Ian Johnson,New York Bureau

NEW YORK -- A $5 billion loss, massive staffing cutbacks and a plummeting stock price meant a pay cut last year for IBM boss John F. Akers -- from $1.57 million to $1.3 million.

The modest 17 percent cut was disclosed yesterday in International Business Machines Corp.'s 1992 proxy, which showed that the outgoing chief executive officer's base salary stayed at $925,000, while his bonus was cut to $375,000 last year from $650,000 in 1991, when the company lost $2 billion.

Although Mr. Akers is due to leave shortly, he was renominated by the computer maker to serve on the board of directors for a 10th year. For non-employees, the position carries a $55,000 salary.

"Just earning a bonus during a year like that is something. But it is progress. Since the SEC changed its rules, pay has been more and more tied to performance," said Nell Minow, a partner at Lens Inc., a Washington firm that specializes in shareholder activism.

The new SEC rules force companies to list precisely what executives make, the stock options they receive

and how the company's stock performed in comparison to similar companies' stock.

IBM's proxy was sent out in preparation for the computer company's April 26 shareholder meeting in Tampa, Fla.

Because Mr. Akers resigned this year, the proxy, which covers last year's business, does not say how much his severance package will be, but does indicate that he will have some cushion to fall back on. The proxy says that in two years the 58-year-old will be eligible for a $1.2 million-a-year pension.

But Mr. Akers could be earning much more if the company had performed better last year. He was entitled to exercise 97,000 stock options last year at $89 a share.

IBM's stock closed yesterday at $55, down 62.5 cents.

In 1991, Mr. Akers' stock option plan earned him $499,000 and the year before he made $1.9 million on the stock options.

"We think this shows that the system is working. They could have earned much more if the stock price was higher. It may have been painful for the people at the top, but it works," IBM spokesman Jim Ruder man said.

More than 40,000 IBM employees were let go last year through voluntary programs. An additional 25,000 are due to go this year, including the company's first firings.

IBM employs 10,000 in Maryland, but only about 200 have been affected by the cuts.

Cari Christian, executive director of United Shareholders of America, said her organization is satisfied that IBM links pay to performance, even if the reduced pay remains at a comfortable level.

"The main thing is that there is a correlation between pay and performance. We feel that this is the best way to ensure good management," Ms. Christian said.

Mr. Akers is due to leave the company as soon as it can find a replacement. It was widely assumed that he would also leave the board of directors, but if shareholders approve the company's slate of directors he will stay.

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