- Take a page of the investment capital game book,, Intel requires that his new CEO will put a certain skin in the game. Lip-BU Tan has agreed to buy $ 25 million in intel actions with its own money. And here is the friction: it will not be paid if it is cashed. However, if it crushes the lights with its performance, its pay package has a potential value – which implies achieving all possible objectives at the highest level – of more than $ 400 million, according to an analysis carried out by Farmient Advisors. And for shareholders, this would mean that Intel’s market capitalization increased by $ 208 billion to 312 billion dollars.
The CEO of Intel Lip-Bu Tan had its first day The work on Monday, and the challenge that the veteran of the flea industry is confronted is amazing.
The action, at the price of around $ 26, has lost more than half of its value since December 2023 – although it has gathered more than 10% after its appointment – and the company is in a Strategic crossroads With its flea design and manufacturing companies. Tanning clean letter For Intel employees, noted that it had been “a few difficult years” and that the company was “one of the most pivotal moments in its history”.
But if Tan, 65, can hammer the strategy and execute what could be a colossal reversal, the executive born in Malaysia and raised in Singapore could achieve a significant salary set based on the terms of the agreement which he concluded with the Board of Directors of Intel, dated March 10. And with regard to Intel shareholders, the realization of TAN would mean that the market scholarship has not seen the balance sheet more than $ 300 billion – a technical level.
The CEO of Farient Advisors, Robin Ferracone, said Fortune This Tan discount is not limited to the execution of a turnaround; He almost needs to rebuild the business. “The doubling of the course of action takes you where you were a few years ago, but the hat -trick at the fork of $ 70 – Intel has not seen it since about 2000,” said Ferracone. “So it’s a big elevator.”
Tanning letter Describes an incredibly high complex series of obstacles, it will have to clarify shareholders and society perfectly. But he could finally end up with a remuneration package of a value greater than $ 400 million if he maximum on all his performance and his potential prices, according to the farry analysis of his pay plan. In addition, Tan will have to personally invest $ 25 million of his own money in action during his first 30 days of work, and maintain him for the next five years, which means that he could potentially lose money if he did not feel up to the task.
“This is a high challenges package that reflects both the confidence of the board of directors in its ability to stimulate a turnaround and a strong commitment to payment principles,” said Arjan Singh, the business strategy consultant Fortune.
The link between the growth in equity prices to performance objectives establishes a high bar, said Singh, managing partner of corporate war games and auxiliary professor of marketing and global strategy at the Cox School of Business of the Southern Methodist University.
“This indicates that the board of directors aligns the incentives of managers directly with shareholder yields,” he said. “It also helps to mitigate concerns about an excessive CEO salary without results – there are no free equity here, and the failure to delivery will not be rewarded.”
Eric Hoffmann, vice-president and data director at Farient Advisors, said Fortune He “cannot emphasize enough for the subsidies (of Tan) to be able to fully fulfill without appreciation of the share of the shares and slightly better than the median yield of total shareholders against the S&P 500”.
Anatomy of a recovery plan
According to Farient’s analysis, the annual Tan cash salary includes a basic salary of $ 1 million with a target bonus of $ 2 million. His annual equity subsidy in 2026 is estimated at $ 24 million, but he will not get it before next year.
For the connection portion of its agreement, Intel granted Tan a subsidy of the new rental unit (PSU) worth $ 17 million and an option to share a share of $ 25 million. But Tan will have to double the course of the action to win the target number of PSU – more than the course of the action must outperform the S&P 500. If Tan succeeds in tripling the course of the action, it will win the number of actions three times. In this scenario, the PSU subsidy would be estimated at $ 153 million, according to Farient’s analysis. The options are acquired in five tranches over five years. In the scenario at the price of the tripled stock, the first two slices of its share purchase options could be exercised for $ 39 million and the other three slices could be exercised for $ 88 million for a total of $ 127 million, according to Farient.
For its annual awards, Intel granted Tan a second PSU subsidy worth $ 14.4 million which could be worth $ 86 million if the price of triple and Intel equities reaches shareholders’ return and action price objectives for maximum payment of shares. He also obtained another subsidy of share purchase options worth $ 9.6 million which could be exercised at a value of $ 42 million.
By combining the 2025 connection and exercise prices, assuming maximum performance and a triple of the share price, the supply of TAN has a potential value of some $ 408 million, according to Farient.
Hoffmann described the remuneration regime as “very lever effect”. There is an important drawback for Tan, because he could lose his subsidies, and he could also lose money on his investment, he said.
But if Tan reaches the maximum possible performance, the shareholders of Intel “will dance in the streets,” said Ferracone FortuneSince Tan’s long -term incentives are “very aligned with the interests of shareholders with recognition that Intel needs to create a significant value and catch up otherwise the competitors to exceed in IA space”.
The value of the date of grant of his total salary package is $ 69 millionwhich includes his salary, his target bonus and his value of options, equity and ESPs, but does not take into account the realization of the maximum amounts, which could be higher if the course of the action increases.
Based on the terms of the offer, this is exactly what Intel expects from Tan – more much more. The share of the lion of the potential remuneration of Tan is at risk and based on actions and one of the main components is the grant of the performance actions of the new rental.
“The prices of the CEOs of CEOs are often linked to the realization of specific operational or financial measures, but it is rare to require such increases in stock market courses,” said Jason Schloetzer, expert in corporate governance and associate professor at the University of Georgetown, Jason Schloetzer Fortune. “In my opinion, the plan is distinguished for its fairly aggressive performance criteria.”
Schloetzer noted that CEO’s remuneration plans often have three years acquisition hours and that the Intel five -year plan is longer than usual. He said that this could reflect the desire of the Board of Directors of Intel “to balance the aggressive objective without motivating excessive risk corners or corners that create long -term damage”.
In a statement, Intel said that the TAN wage package was competitive with the market.
“Lip-Bu’s remuneration reflects its experience and its references as a technological leader accomplished with in-depth experience in the industry and is competitive on the market,” said Intel. “The vast majority of its remuneration is based on actions and linked to the creation of the value of long -term shareholders.”
The design of the Intel plan is a clear signal for investors that the company believes in Tan’s ability to reverse the performance of the technology giant, but that it will not get a free lunch, said Singh. In addition, Tan will be on an equal footing with investors at the start with its wish to buy shares worth 25 million dollars, then keep it for the full period of five years for all its PSU to accept.
“Obviously, the use of vehicles based on actions, the longer-term acquisition of five years, the performance parameters in the plans, and the required investment of LIP-BU clearly communicates that the work of LIP-BU # 1 is to create a value of shareholders, which is completely aligned with the interests of shareholders,” said Ferracone.
As for his personal investment, this is not a common characteristic in the CEO’s letters of tenders, said Courtney Yu, director of research in the Equilar remuneration and governance company, and the size of the investment itself is on the upper side compared to CEOs with similar demand.
CEO of the Investment Capital Company hold out Large participations in the companies they direct, but the CEOs of public companies are generally required to develop participation over time by holding the equity they obtain in compensation and by maintaining a minimum participation of a value of five or six times their annual salary.
“For a public company, this level of financial engagement is a strong signal of personal responsibility,” noted Singh. “It guarantees that the CEO has real skin in the game, which could resonate with shareholders looking for leadership which is fully attached to the long -term success of Intel.”
Regarding the purchase of shares of $ 25 million in Tan, Intel said that it “reflects its belief in Intel and its commitment to create a value of shareholders”.
In addition to the agreement with Tan, Intel announced that it compensate The acting co-PDG Michelle Johnston Holthaus and David Zinsner with 1.5 million dollars in cash to have maintained the fort during the research process after the end of the mandate of the former CEO Pat Gelsinger to the Giant Chip in December.
Likewise, the acting executive president of the board of directors, Frank Yeary, will take over the independent president of Intel. For his time in the temporary role, Yeary will obtain limited action units worth $ 700,000, said the company.
This story was initially presented on Fortune.com
