It’s pretty much an accepted fact that European CEOs make a lot less than their American counterparts. This article by our friend Michael Brush essentially provides that evidence. Of course, this really only applies to European executives who stay in Europe. Once they come here, all bets are off.
Take this 8-K that Johnson & Johnson (JNJ) filed earlier this week. While there’s no employment contract attached, the company provides some key details on its decision to hire Synthes CEO Michel Orsinger once the $21.3 billion deal (announced on April 27, 2011) closes sometime next year. It’s not so much Orsinger’s $700K salary that caught our attention as it was the $17.2 million “new hire grant” of restricted shares. We’ve been noticing a trend lately of companies handing out options and RSUs as if they were candy, but even by those new standards, this one seemed unusually generous. The options vest on the third anniversary.
To be fair, the filing notes that Orsinger’s salary and bonus “are less than half of the base salary rate and annual bonus target provided by Synthes under his current employment agreement”. But it’s not exactly like Orsinger is walking away from Synthes empty-handed.
Indeed, judging by the amended S-4 that J&J filed in late October, one might wonder why Orsinger wants to work at all, let alone on some suburban campus in New Jersey, instead of lazing around popping Swiss chocolates into his mouth and pondering the future of Swiss cinema. As that filing spells out, Orsinger stands to make somewhere between $36.2 million and $51.9 million under an agreement with Synthes that was finalized in the days before the deal with J&J was announced. So he gets a huge amount of money on his way out the door and another chunk on his way in.
Orsinger, who had worked at Novartis earlier in his career, has been at Synthes since 2004 when he joined as Chief Operating Officer. In 2009, four top Synthes executives were charged (PDF) by the U.S. Department of Justice with conducting clinical trials of a medical device without FDA approval. Last fall, a Synthes subsidiary agreed to pay a $22.5 million fine (PDF) related to the charges, which included a felony count of conspiracy and 110 misdemeanor counts. It was around that time that the discussions with J&J began in earnest.
Without the actual employment agreement in public view, we have no idea what other goodies might be thrown in as sweeteners. It’s unlikely that despite the hefty salary, Orsinger will be considered a Named Executive that J&J will have to disclose in its next proxy statement. What is clear is that Orsinger has taken a page from top American executives by asking, “What else can I get?”
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