Intel Changes Pay Rules in Seeking Closer Ties to Performance – Bloomberg

Intel Corp., the world’s largest
chipmaker, said it will require more executives to own stock and
tie bonuses to operating goals, moves aimed at connecting pay
more closely with the company’s financial performance.

Starting this year, 350 senior leaders will have to own
specified amounts of shares, the Santa Clara, California-based
company said yesterday in a letter to shareholders. That’s up
from the 50 executives covered under existing guidelines.

Intel said it is changing its pay structure following input
from investors, seeking to align its compensation with the
interests of shareholders. The stock rose 26 percent last year,
compared with a 30 percent gain in the Standard & Poor’s 500
Index. Sales (INTC) slipped for a second straight year. The rules are
being instituted under Chief Executive Officer Brian Krzanich,
who was promoted to the company’s top job in May.

“The company is clearly in transition and they need to
adjust the compensation structure to motivate employees to do
well,” said Patrick Wang, an analyst at Evercore Partners Inc.
in New York. Wang has the equivalent of a sell rating on Intel
stock. “This is a good change.”

Investors in public companies are increasingly voting
against proposals for executive pay, said Aaron Boyd, director
of governance research at Equilar Inc., which tracks executive
compensation
. Intel may spur a trend he said.

“We’re going to see more compensation designs and plans
based on conversations with shareholders,” said Boyd, who’s
based in Redwood City, California. Intel has “always been a
leader when it comes to trying to align pay with performance.”

Pay Metrics

Cash bonuses for employees will be determined more by the
performance of the business units they work for, Intel said. The
weighting of that metric will rise to 50 percent of the total
calculation from the current 33 percent, Intel said. Total net
income and earnings compared with peer companies are the other
two bases for calculations the company uses.

The company also said performance-based stock grants will
no longer have a minimum value, and if total shareholder return
over three years falls below a certain level, there will be no
payout.

Intel shares fell 2.4 percent to $23.95 at the close in New
York yesterday.

To contact the reporter on this story:
Ian King in San Francisco at
ianking@bloomberg.net

To contact the editor responsible for this story:
Pui-Wing Tam at
ptam13@bloomberg.net

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