Siebel Systems has taken a giant step toward becoming a leader in tying pay to performance.
Under Siebel’s “performance stock plan,” as described in a regulatory filing, individual performance goals will be based on the company’s 2005 revenue, operating margin, and customer satisfaction, or on other company performance goals to be determined by Siebel’s compensation committee. Some of the stock options granted to directors, executives, and other employees will vest earlier than scheduled if the company achieves certain goals, such as those based on revenues and operating margins. Any cash bonuses to executives and senior managers will be awarded based on similar criteria.
Siebel’s announcement came after more than a year of discussions with the California Public Employees’ Retirement System (Calpers), reported The Wall Street Journal. “This is further than most technology companies, and most big companies, want to go,” said Ted White, Calpers’s portfolio manager for corporate governance, according to the paper.
The software company’s corporate governance has been under attack for several years. The Journal pointed out that in 2002, the Teachers’ Retirement System of Louisiana sued Siebel, alleging that the company’s board improperly awarded nearly $1 billion of options to founder Tom Siebel, who resigned as chief executive officer last year. In 2003, added the paper, the company settled the case, and Tom Siebel voluntarily canceled all stock options he had received since 1998.
In 2003, Siebel shareholders voted against non-binding proposals to treat stock options as an expense and to link executive options to the company’s performance. The company itself had opposed the measures, arguing they would cause it “significant damage.”