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Pay for performance?

Should the CEO be held accountable when a stock is sputtering? Not according to Solectron’s (SLR) compensation committee. According to the company’s recent proxy, the company increased CEO Michael Cannon’s salary by about 30 percent and also bumped up his bonus by around 35% to $2.76 million in fiscal 2004, even though the stock is up a paltry 1 percent this year. Cannon, a longtime IBM (IBM) executive, joined Solectron at the beginning of 2003.

In the proxy, the compensation committee labors mightily to explain the big bonus by noting that Cannon returned the company to profitability after 11 consecutive quarters of losses. It then attempts to further justify the hefty bonus by explaining in a footnote to the summary compensation table that the $2.76 million was comprised of two different amounts: $1.85 million was part of a “bonus guarantee” to mark Cannon’s first full year of employment. The remaining $919K is Cannon’s pro-rated bonus for fiscal 2004.