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Big payday for IBM chief
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March 16, 1998: 6:08 p.m. ET
Gerstner stands to pocket a fortune if IBM stays on track
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NEW YORK (CNNfn) - International Business Machines Corp. Chairman and Chief Executive Officer Louis Gerstner stands to pocket hundreds of millions of dollars if he can keep Big Blue on the right track.
According to the company's annual proxy statement, Gerstner received a stock option package last year that could be worth more than $350 million if IBM's stock rises 10 percent a year over the next 10 years.
Given IBM's recent track record -- the stock has more than tripled in value over the last four years -- the target is certainly within reach. But even if IBM's shares rise only 5 percent a year over the next 10 years, the options would be worth $139 million.
Gerstner, who came to IBM in 1993 and has engineered one of the biggest turnarounds in U.S. corporate history, also agreed to stay at IBM as a consultant for 10 years after he retires. In November of last year, he signed a new contract to remain as chairman and chief executive until 2002.
According to IBM's proxy, Gerstner received a total of $8.1 million last year, consisting of a bonus of $4.5 million, a long-term incentive award worth $2.1 million, and his annual salary of $1.5 million.
In addition, Gerstner received two option awards last year -- one for 200,000 shares of IBM stock and another for 2 million shares of stock spread out over the next five years. The smaller option award reflects the board's annual review of long-term compensation while the larger stock option award is part of a previously reported employment agreement that calls for Gerstner to remain as chairman and chief executive until the year 2002.
Following his retirement, Gerstner will become a consultant to the computer giant for the next 10 years, receiving a daily fee based on his $1.5 million annual salary and use of all IBM facilities and services, including the corporate jet.
In its proxy statement, IBM's board of directors cited Gerstner's leadership and IBM's improved financial results for the lucrative bonus payments and stock option awards.
"Now in his fifth year as chairman and chief executive officer of IBM, Mr. Gerstner continues to demonstrate highly effective leadership," the company said. "Since assuming his role in April of 1993, Mr. Gerstner has led IBM to industry strength -- continuing to deepen and expand client relationships as well as the focus oncore competencies. As a result, during his tenure, stockholders have experienced a 343 percent increase in total stockholder return."
In 1996, Gerstner received $6.8 million in cash and bonus payments, consisting of $1.5 million in salary, a cash bonus of $3.27 million, and $2.1 million in long-term incentive payouts.
In addition to his 1997 compensation, Gerstner exercised options on 101,340 shares last year worth about $6.7 million. 
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IBM Corp.
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