{"id":70987,"date":"2018-06-05T13:25:15","date_gmt":"2018-06-05T18:25:15","guid":{"rendered":"http:\/\/news.medill.northwestern.edu\/chicago\/?p=70987"},"modified":"2018-06-05T11:09:35","modified_gmt":"2018-06-05T16:09:35","slug":"motorola-solutions-ceo-brings-in-15-million-pay-package","status":"publish","type":"post","link":"https:\/\/news.medill.northwestern.edu\/chicago\/motorola-solutions-ceo-brings-in-15-million-pay-package\/","title":{"rendered":"Motorola Solutions CEO brings in $15 million pay package"},"content":{"rendered":"

By Sarah Foster<\/strong>
\nMedill Reports<\/em><\/p>\n

The head of Motorola Solutions Inc. is reaping the financial benefits of leading a well-performing company, analysts and compensation experts said.<\/p>\n

The company\u2019s directors raised CEO Gregory Brown\u2019s salary by 27 percent in 2017, a year when Motorola Solutions grew profits and adjusted income, completed multiple acquisitions and launched 85 new products, according to its most recent proxy statement, which was filed on March 28 with the U.S. Securities and Exchange Commission. Last year, Brown complemented a $1.25 million base salary with additional incentives worth $13.81 million, making his total compensation package $15.06 million, the statement said. The Chicago-based company provides telecommunications equipment for public safety officials.<\/p>\n

Brown\u2019s total compensation package has nearly doubled since 2014, when he received $7.61 million, according to the company\u2019s 2014 proxy statement. At the same time, Motorola stock price has nearly doubled over the past three years as well, analysts said.<\/p>\n

\u201cHe\u2019s benefited just as much as shareholders have,\u201d said Keith Housum, managing director and equity research analyst at Northcoast Research.<\/p>\n

<\/p>\n

Brown\u2019s pay raise in 2017 reflects the ideal structure of an executive compensation package, said Steve Kaplan, a professor at the University of Chicago Booth School of Business who specializes in corporate governance. When a company performs well, the CEO gets a raise. When the company performs poorly, the CEO makes less money. Brown belongs to the first scenario, Kaplan said.<\/p>\n

\u201cHe is delivering,\u201d Kaplan said. \u201cAnd because he is delivering, he is getting paid.\u201d<\/p>\n

Based on Kaplan\u2019s research, the average pay of a CEO at a publicly traded utility company on the Standard & Poor\u2019s index is between $10 million and $15 million, making Brown\u2019s compensation just slightly more than usual, he said.<\/p>\n

\u201cHe outperformed, so it would be perfectly natural to pay him more,\u201d Kaplan said.<\/p>\n

Brown\u2019s compensation package is based on a combination of short-term and long-term incentives that focus on raising the company stock price, outperforming the S&P 500, growing profits and sales, and increasing yearly dividends to shareholders, according to the proxy filing.<\/p>\n

Motorola increased its income for the full-year 2017 by 6 percent to $6.4 billion, compared with $6 billion a year earlier, according to the company\u2019s earnings release. Earnings under generally accepted accounting principles, however, fell by $155 million last year, due to a one-time tax charge of $1.2 billion under U.S. tax reform. Excluding this charge, earnings increased by 27 percent to $1.1 billion, compared with $844 million a year ago, the release said.<\/p>\n

Motorola also repurchased $483 million of stock last year and paid dividends of $307 million to shareholders, according to the company\u2019s proxy statement. The company\u2019s total shareholder return, which includes stock price increases and regular payments of dividends over a year-long period, is 44 percent, while the S&P 500 is 38 percent, the proxy said. Outperforming the S&P 500 index is one of Brown\u2019s long-term pay incentives.<\/p>\n

It\u2019s good that Motorola Solutions includes outperforming the S&P 500 as a long-term pay goal, said Robert Wiseman, senior associate dean at the Eli Broad College of Business at Michigan State University who specializes in executive compensation and corporate governance. When the market generally goes up, so do most stock prices, and consequently, shareholder returns, he said. When returns are compared to an index, it more accurately represents how well a company is performing, he said.<\/p>\n

\u201cIf the general market goes up like we saw last year, the stock just goes up with the market,\u201d Wiseman said. \u201cIt at least shows that this person is driving value independent of the market\u2019s valuation of companies across the board.\u201d<\/p>\n

Acquisitions have caused the company\u2019s stock price to increase, Fitzsimmons said. Motorola invested $298 million in acquisitions last year, according to the company\u2019s proxy statement. One of these acquisitions closed in August, when Motorola Solutions acquired Kodiak Networks, a broadband push-to-talk service provider.<\/p>\n

\u201cMotorola Solutions is in the midst of a product transformation,\u201d Fitzsimmons said. \u201cI think that\u2019s manifested itself in the stock price of the company the past couple of years.\u201d<\/p>\n

An investment agreement with a private equity firm has also impacted the CEO\u2019s compensation package, Fitzsimmons said. Silver Lake Partners invested $1 billion in Motorola Solutions in 2015 and obtained two seats on the board, said Chris Kutsor, vice president of investor relations at Motorola Solutions.<\/p>\n

After the investment, board members established a new performance metric system. The board will grant executives more stock options if the company achieves certain stock prices by Aug. 25. The first hurdle, reaching a stock price of $85, and the second hurdle, reaching a stock price of $102.50, have already been achieved. The third hurdle \u2014 $120 \u2014 has not yet been met, but it likely will be soon, Housum said.<\/p>\n

\u201cHis compensation will probably be up significantly above his $15 million in 2017,\u201d Housum said. \u201c$15 million may seem quite small in comparison.\u201d<\/p>\n

It\u2019s not entirely unusual for private equity firms to invest in publicly traded companies, Kaplan said, but it does add more pressure on the CEO.<\/p>\n

\u201cThat private equity firm makes money only if the company does well,\u201d Kaplan said. \u201cAnd any money that they pay to the CEO means they make less money. They\u2019re not going to be overpaying the CEO.\u201d<\/p>\n

Nonetheless, Fitzsimmons said he is comfortable with these upward trends in Brown\u2019s pay package. It isn\u2019t out of line, he said.<\/p>\n

\u201cMotorola is a company that has hit those financial targets over the past four years,\u201d he said. \u201cThe compensation package makes sense when you consider the return he\u2019s been able to give to investors.\u201d<\/p>\n

Photo at top: Pedestrians walk by the Motorola Solutions headquarters on Monroe Street in Chicago. The company’s CEO made more than $15 million in 2017. (Sarah Foster\/MEDILL)<\/div>\n","protected":false},"excerpt":{"rendered":"

By Sarah Foster Medill Reports The head of Motorola Solutions Inc. is reaping the financial benefits of leading a well-performing company, analysts and compensation experts said. The company\u2019s directors raised CEO Gregory Brown\u2019s salary by 27 percent in 2017, a year when Motorola Solutions grew profits and adjusted income, completed multiple acquisitions and launched 85 […]<\/p>\n","protected":false},"author":438,"featured_media":70989,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[27,4227],"tags":[],"class_list":["post-70987","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-spring-2018"],"yoast_head":"\nMotorola Solutions CEO brings in $15 million pay package - Medill Reports Chicago<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/news.medill.northwestern.edu\/chicago\/motorola-solutions-ceo-brings-in-15-million-pay-package\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Motorola Solutions CEO brings in $15 million pay package - Medill Reports Chicago\" \/>\n<meta property=\"og:description\" content=\"By Sarah Foster Medill Reports The head of Motorola Solutions Inc. is reaping the financial benefits of leading a well-performing company, analysts and compensation experts said. 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