The software company, after settling a case involving stock options with the Teachers’ Retirement System of Louisiana, has opted to change the structure of its compensation system so that it is tied more to financial performance than in the past, according to the Wall Street Journal (See Pension Fund Charges Firm With Option Violations, Cover-up ). The reforms, disclosed in an SEC filing, tie stock-option awards and bonuses to financial criteria such as revenue growth and improvements in operating margins, as well as customer satisfaction. When targets are hit, options will become vested, and bonus sizes will be determined.
Pension giant CalPERS – which is active in corporate governance and other activist investment causes – has praised the move. “I saw a very significant change in attitude” at the company, Ted White, CalPERS” portfolio manager for corporate governance, told the Journal. “This is further than most technology companies, and most big companies, want to go.” The Siebel reforms came after over a year of discussions with CalPERS.
CalPERS has worked with others on the same issue, including JDS Uniphase Corp. and Walt Disney Co (See JDS Uniphase Linking Stock Options to Performance ).
Siebel’s change did not come without past problems, however. In 2002, the Louisiana pension fund filed suit against the company, alleging that over $1 billion in options was improperly awarded to the company’s founder, Tom Siebel (See Siebel Corporate Reforms Set in Pension Fund Suit Settlement ). Denying that it did anything wrong, the company settled in 2003. In the same year, the company fought to keep a TIAA-CREF shareholder proposal that sought to tie compensation to performance off the table. The proposal was ultimately voted down by shareholders.