What CEO earned the biggest pay raise of 2015? Fortune’s Steve Gandel reports this morning that the honor goes to Sandeep Mathrani, CEO of shopping mall operator General Growth Properties, who pulled in just over $39 million for the year, up 702% from the year before.
You might think that big pay hike reflects awesome performance. It doesn’t. Sales and operating profits at the company fell slightly, and its share price was up less than one percent for the year. Instead, Mathrani’s pay reflects an award of $20 million in restricted stock that is tied to a new employment agreement he signed last year.
Some of my CEO readers will protest that the signing bonus, which doesn’t vest until 2020, shouldn’t be counted as compensation for 2015. Fine, but get this: In addition, Mathrani also got a $3 million “performance” bonus. The targets set by his board’s compensation committee for that award were a 1.1% increase in EBITA and a 93.5% occupancy rate at his malls – neither of which he hit. But the board gave him the award anyway.
Another CEO on the pay-for-performance wall of shame: Medtronic’s Omar Ishrak. He got a 225% pay raise, to $32.3 million. That was in compensation for a rocky year in which the company’s main financial boost came from cutting its tax bill by hundreds of millions of dollars by purchasing Covidien and moving its headquarters to Ireland.
Overall, CEO pay was down slightly in 2015, reflecting poorer performance. But examples like those above suggest something is still amiss in the way boards compensate leaders.
More news below.
• Peabody Energy files for bankruptcy
Peabody Energy, the world’s largest privately owned coal producer, filed for U.S. bankruptcy protection on Wednesday in the wake of a sharp fall in coal prices that left it unable to service a recent debt-fueled expansion into Australia. The company listed both assets and liabilities in the range of $10 billion to $50 billion, according to a court filing. Peabody’s Chapter 11 bankruptcy filing ranks among the largest in the commodities sector since energy and metals prices began to fall in the middle of 2014 as once fast-growing markets such as China and Brazil began to slow. Reuters
• Valeant receives notice of default
One of the bond holders of Valeant Pharmaceuticals has warned the Canadian company of its intent to call a default. The beleaguered company will have 60 days to file its annual report – or repay what it owes to the creditor, reportedly Centerbridge Partners. The problem isn’t the amount of debt that is owned by Centerbridge (it is reportedly only about $250 million of the company’s 5.5% notes due 2023). The issue is that other creditors holding some of Valeant’s $32 billion debt could demand to be repaid as well. Fortune
• Schlumberger cutting Venezuela work
Oilfield services provider Schlumberger said it would reduce its operations in Venezuela due to payment problems, a further sign of the cash crunch facing the OPEC nation because of weak oil markets. Venezuelan state oil company PDVSA, the exclusive operator of the country’s oilfields, has built up billions of dollars in unpaid bills to service providers as a result of cash-flow problems. Schlumberger in 2013 gave PDVSA a $1 billion credit line to allow it to continue delivering services despite the accumulating debts, though the company later recorded some losses due to Venezuela’s currency devaluation over the past two years. Reuters
• McCormick Foods abandons takeover bid
U.S. spice maker McCormick Foods abandoned its pursuit of British food company Premier Foods on Wednesday, refusing to further improve its $2.1 billion takeover proposal in negotiations with Premier. Premier’s share price, which had nearly doubled since news of McCormick’s interest emerged on March 23, was down 29% on Wednesday. The move by McCormick now leaves the maker of popular British brands like Mr Kipling cakes and Bisto gravy to accelerate its own growth plans, including one involving cooperation with Japanese noodle maker Nissin Foods. Reuters
• Michigan loses $245 million GM investment
General Motors is moving production of a planned new vehicle—rumored to be a crossover Cadillac—out of its Orion Township assembly plant in Michigan to a factory in Kansas. The move means Orion loses a production car and the $245 million GM plans to invest in the still unnamed vehicle. That money will be invested in the Fairfax plant in Kansas City, Kan. instead. The change added to concerns about job security at the Orion assembly plant, which employs about 1,100 hourly and salaried workers and has had three recent reductions in shifts. GM said the move was needed to build vehicles “as cost-effectively as possible as benefit our customers and the business.” Fortune
Around the Water Cooler
• Facebook CEO’s big sci-fi bet
Facebook CEO Mark Zuckerberg says that over the next 10 years, the company is planning to push full force into artificial intelligence and virtual reality. He believes those technologies will make the social network even more compelling. Zuckerberg added that Facebook’s goal in advancing artificial intelligence technology is to “build systems that are better than people in perception.” And while Facebook recently released the Oculus Rift VR headset, with hopes to generate big sales, Zuckerberg believes similar devices will be much smaller and resemble traditional glasses in the future. Fortune
• Peter Thiel is looking to diversify
Peter Thiel, the venture capitalist who co-founded PayPal and was the first outside investor in Facebook, doesn’t think the technology sector is in a bubble, but he’s looking to diversify some investments anyway. Venture capital investment in the U.S. has been in retreat since late 2015 because of concerns that many tech darlings have been accorded unsustainable valuations. Thiel said he is “somewhat concerned by the frothiness of the markets.” He adds that he is actively looking to invest the $1.3 billion that his Founders Fund recently raised abroad and beyond the tech sector. About two-thirds or three-fourths of Thiel’s investments will be in areas including next generation technologies, consumer Internet, and enterprise software, he said. Bloomberg
• Sean Parker to donate $250 million
Sean Parker, founder of the music file-sharing service Napster and the founding president of Facebook, has announced he’s giving $250 million to six cancer centers nationwide, including Manhattan’s Memorial Sloan Kettering and Stanford. Parker says he is putting his money behind cancer immune therapy because it is at a turning point and would benefit from research that is done without regard for the costs. Parker’s enormous cash infusion is the largest ever for cancer immunotherapy — and one of the largest ever for cancer research — and comes three months after President Obama called for a $1 billion federal cancer research program that he dubbed a “moonshot.” USA Today
• Ivanka Trump defends her father
Donald Trump might have just found a new secret weapon: his daughter Ivanka. In an hour-long interview with CNN Tuesday night that featured the GOP frontrunner, his wife Melania, and four of his children, Ivanka Trump stood out as a capable defender of her father’s record, especially with women, an area where he’s repeatedly floundered. She touted the “incredible female role models” that her father has employed in the highest executive positions at the Trump Organization, “in an industry that has been dominated by men.” Ivanka Trump added that her dad told her and her younger half-sister Tiffany that no pursuit was off-limits. “So for me, his actions speak louder than the words of many politicians who talk about gender equality but it’s not evidenced in their daily employment practices,” she added. Fortune