The Corporate Library's analyst's have significant concerns related to Western Digital Corporation's CEO compensation. To purchase the company's governance rating and risk profile at a steep discount ahead of the annual meeting on November 11, visit our online store. The profile contains:
- Proprietary TCL governance risk ratings and analyst commentary
- Complete CEO compensation data and review
- Board and individual director profiles and compensation
- Committee structures and independence
- Chronology of key governance events
- Hard-to-find related party transactions
- Current SOX 404 compliance status
- Critical takeover defenses information
The company continues to have a semi-annual incentive plan. We still believe that performance periods for annual incentives should not be less than 12 months due to the fact that if the company performed poorly in one fiscal half, the executive may still be generously paid. This is the case here for fiscal 2009. The company did not meet the earnings per share (EPS) target set for the first half of the year. For the second half, the Compensation Committee modified its approach by setting quarterly goals instead of establishing an aggregate EPS target for the second fiscal half. The result of this was the 191% achievement of the $1.08 EPS target; the EPS target for the first half of the year was $2.12. The only thing worse than an incentive plan with two performance periods within 12 months is an incentive plan with three performance periods within 12 months. Moreover, to change an incentive plan mid-way through the year to ensure cash bonuses for its executives based on lower expectations is a policy of “pay for failure.” Additionally, while the company reduced the CEO’s base salary in December 2008, the effect of this is diminished due to the increase in the target incentive opportunity for CEO John Coyne. Making this plan even more ineffective is the fact that there is discretion in regards to the final payment based on subjective evaluation of non-financial factors.
For a complete review of this company's CEO compensation practices, purchase the governance risk profile.
