Stock options swell CEO pay

By Gary Strauss and Matt Krantz, USA TODAY

Stock options are back in style for CEOs. 

Wall Street's gains are enabling top executives to strike gold as they exercise stock options for some of the biggest paydays since 2007. A USA TODAY analysis of corporate proxy filings found several with 2010 options hauls of at least $20 million.

Stock options, long a prime executive compensation tool, grant holders the right to acquire shares at a set price. If an option is priced at $40 and exercised when the stock is at $60, there's a $20 profit.

Many options awarded before the recession were worthless or held little value as stock prices fell, but they've been bolstered by a two-year bull market.

"The stock market did very well, the options are very valuable now, so it makes sense that CEOs would exercise them," says New York University finance professor Xavier Gabi.

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Among 2010's big winners:

• Starbucks CEO Howard Schultz exercised options worth $24.7 million. That's on top of compensation valued at $21.7 million. 2010 total: $46.4 million.


• CVS Caremark CEO Thomas Ryan made $28.2 million exercising options. That's on top of pay, stock, perks and compensation worth $15.5 million. Ryan also got company stock promised earlier that was worth $22 million. Value of Ryan's 2010 compensation: $65.7 million.


• Gilead Sciences CEO John Martin gained $35.8 million. That's on top of compensation valued at $14.2 million. His 2010 total: $50 million.


• Allergan CEO David Pyott made $30.6 million. The drug marketer valued Pyott's cash, stock, incentive pay, perks and other compensation at $11.1 million. Pyott's 2010 total: $41.7 million.


• Yum Brands CEO David Novak took in $22.7 million. The fast-food operator said Novak also got cash, incentive pay, perks and other compensation worth $12.6 million, bringing his 2010 total to $35.3 million.


• Paul Saville, CEO of homebuilder NVR got $21.7 million. That's on top of pay valued at $30.8 million. 2010 total: $52.5 million.


• Joseph Tucci, CEO of EMC: $20.2 million. The tech firm valued his other pay, including cash and stock, at $12.4 million. 2010 total: $32.6 million.

Compensation consultant Bruce Ellig says execs who sell stock after exercising underlying options aren't sharing the best interests of long-term shareholders. "They should hold shares until they retire," says Ellig, author of The Complete Guide to Executive Compensation. "When they do that, they are connecting with shareholders.

Still, big options gains could accelerate. Wall Street's rebound has also boosted the value of options issued at post-crash prices in 2008 and 2009.

Says Lehigh University finance professor Paul Brockman, "If I were concerned about future market movements or with increasing tax rates, I might want to take my money now."