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Intel makes it harder for Gelsinger to earn beaucoup bucks as CEO

Shares have already been moving in the wrong direction for Gelsinger's stock awards

Intel is making it more difficult for CEO Pat Gelsinger to earn a significant portion of his compensation package, even as such awards have become increasingly out of reach due to a tanking stock price.

The x86 giant on Tuesday announced amendments to how and when Gelsinger can receive payouts from the new hire performance-based equity awards he was granted upon becoming CEO in February 2021. The changes were laid out in a 8-K regulatory filing with the US Securities and Exchange Commission.

The modifications, among other compensation changes for top executives outlined, were enacted in reaction to a sharp rebuke by investors earlier this year to the pay practices of Intel's top officers. Shareholders had voted in a nearly two-to-one ratio against the compensation packages for the chipmaker's top execs. While it was non-binding, Intel said at the time that it took the vote seriously.

In general, the alterations to Gelsinger's new hire performance-based equity awards increased the "stock price performance hurdles for certain awards," while "lengthening the period during which stock price performance hurdles must be maintained," according to the SEC filing.

For Gelsinger to exercise his performance-based stock options, he must now increase Intel's stock price by 50 percent — rather than the original 30 percent figure — over the five-year period after he received the options. Furthermore, Intel's stock price must hold above that 50 percent threshold for 90 days instead of the original 30 days for Gelsinger to receive the payout.

For his strategic and outperformance stock units, Intel removed the ability for Gelsinger to receive payouts for a portion of the awards on the third anniversary of the grant date, meaning he will now have to wait the full five years from that point to vest them. The company also lengthened the period during which the stock price is above each awards' applicable thresholds from 30 days to 90.

To outline how this makes it harder for Gelsinger to receive payouts for these awards, let's consider that Intel's stock price closed at $29.67 today. That is less than half the $61.81 stock price Intel had when Gelsinger became CEO on February 2021.

That means Gelsinger must work some real magic to get shareholders absolutely hyped so that he can earn his performance-based stock options, which requires Intel's shares to hit at least $74.47 in a few years. To vest his stock units, Intel's stock price must hit even higher, at $148.95. And shares must hold at that level or higher for triple the amount of time.

Investors have not been pleased with how expensive Gelsinger's comeback plan for Intel is, what with all the new factories and expensive manufacturing investments it entails.  He has promised that the company will surpass Asian foundry giants in advanced chip-making capabilities by 2025, which means there will be little time for Intel to push up the share price before the grant period ends the next year. ®

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