Medtronic keeps pay unchanged for outgoing CEO
Medtronic Inc. paid its former Chief Executive William Hawkins just under $9 million in total compensation during his last full year leading the company, which has since hired a General Electric executive to try and revive its lackluster business.
Hawkins, 57, retired as CEO in June after less than four years leading the world's largest medical device manufacturer. He was succeeded by Omar Ishrak, 55, former head of General Electric Co.'s health care systems business who inherits the same challenges that confronted his predecessor: sluggish sales, reduced reimbursement from insurers and tighter regulation by the federal government.
Medtronic kept Hawkins' compensation largely unchanged in fiscal 2011, falling 2 percent to $8.9 million from $9.1 million the previous year.
His base salary rose 12 percent to $1.3 million, though this was more than offset by a drop in stock options and awards, which fell to $5.2 million from $5.6 million. Hawkins' performance-based bonus was virtually unchanged at $2.4 million.
Hawkins' other compensation totaled more than $48,500, including general business expenses.
Medtronic, based in Minneapolis, makes devices such as implantable heart defibrillators, spinal implants, and insulin pumps.
The company's two biggest businesses — implantable defibrillators and spinal implants — have faced weakening sales due to safety recalls and the loss of health insurance for unemployed workers. As a result, the company announced 2,000 layoffs in February and slashed its 2011 earnings expectations. The medical devices market grew by double digits for much of the last decade, but sales growth has shrunk to the low single digits amid economic challenges and slower development of new products.
Shares fell 4.4 percent to $41.75 in the last fiscal year ended April 29.
The Associated Press formula calculates an executive's total compensation during the last fiscal year by adding salary, bonuses, perks, above-market interest the company pays on deferred compensation and the estimated value of stock and stock options awarded during the year. The AP formula does not count changes in the present value of pension benefits. That makes the AP total slightly different in most cases from the total reported by companies to the Securities and Exchange Commission.
The value that a company assigned to an executive's stock and option awards for 2010 was the present value of what the company expected the awards to be worth to the executive over time. Companies use one of several formulas to calculate that value. However, the number is just an estimate, and what an executive ultimately receives will depend on the performance of the company's stock in the years after the awards are granted. Most stock compensation programs require an executive to wait a specified amount of time to receive shares or exercise options.