Better than government work for Scowcroft…
The tradition of government officials leaving jobs and parlaying their knowledge and contacts into real wealth from the business world is so old that there are probably hieroglyphs illustrating the point. But just how lucrative those opportunities can be might still surprise you. At least, it surprised us when we read the preliminary proxy that Qualcomm, Inc. (QCOM) filed yesterday.
The man at the heart of the matter is General Brent Scowcroft, who served as National Security Advisor to two Presidents, Gerald R. Ford and George H. W. Bush. Scowcroft’s biography (courtesy of The Scowcroft Group, of which he is President) has some impressive highlights: West Point graduate, 29-year distinguished military career, international consulting and teaching gigs, advanced degrees in political science from Columbia University, and numerous appointments to public policy groups.
Scowcroft left his second post as National Security Advisor in 1993, and he joined Qualcomm as a director in 1994. In the filing, Qualcomm describes Scowcroft’s qualifications by noting his
“…significant experience in the management of large scale organizations during his days of active military service and his extensive knowledge of international business and governmental affairs, which have been gained at the highest levels of governmental service and through working with numerous international businesses. In particular, General Scowcroft is a recognized expert on China, one of the most important markets in the world.”
Now 86 years old, Scowcroft has been on Qualcomm’s board of directors for 17 years, a part-time job that has produced wealth so great that his government pension check – and we have no idea how much that is – probably looks like chump change.
During Scowcroft’s time on the board, his equity stake in Qualcomm has grown dramatically. The proxy discloses that he now owns (or could exercise options to own) 491,699 shares, which – given the current trading price of $54.10 per share – means that his stake in the company is worth more than $26.6 million. Part of that wealth comes from being in the right place at the right time: Qualcomm’s stock price has risen more than 4,815% since 1994, when Scowcroft became a director.
And then there’s the “salary” for being a director. If Scowcroft attended all 9 board meetings and all 7 Governance Committee meetings in FY 2011, that adds up to 16 meetings, plus whatever work he did on his own time. The proxy discloses that directors don’t get extra fees for attending regular board meetings anymore, but they do get an annual retainer of $100,000, plus $1,500 for each committee meeting, even if they participate by phone. (Scowcroft got $9,000 for his committee work in FY 2011.) The larger wealth comes from getting $200,000 worth of Deferred Stock Units (DSUs), which have some vesting criteria.
Of course, Qualcomm’s compensation practices have changed over the years, and we only had to go back to the proxy filed last January, to discover some significant changes. The biggest change was that the company used to award 14,000 stock options rather than $200,000 worth of DSUs. Clearly the change benefited the directors, since they no longer have to dip into their own pockets to exercise the stock options. All they have to do is stick around for the DSUs to vest. And the octogenarian Scowcroft seems to have mastered the art of sticking around.
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