Black & Decker Corp. Chief Executive Officer Nolan D. Archibald earned $4.35 million in salary, bonuses and long-term incentives and cashed in $31.85 million in stock options in 1998, a year in which the company's market value rose about $1.5 billion.
Archibald's 1998 compensation was 5.6 percent less than the $4.61 million he earned the previous year. It was disclosed in the company's proxy statement -- filed with the Securities and Exchange Commission this week -- in advance of the Towson-based power tool maker's annual meeting April 27 in Easton.
In 1998, Black & Decker shares rose $17 each, or 44 percent. The gain outpaced the 27 percent rise in the Standard & Poor's 500 stock index.
The company previously disclosed that Archibald exercised the stock options, which were granted 10 years ago and would have expired in May.
Stock options are designed as "incentive" compensation, designed to reward an executive only if shareholders also profit. They have been criticized as being too rich a reward, though the Black & Decker CEO's payday after 10 years is about one-seventh the size of the largest payouts.
At times -- though not always -- a top executive's decision to sell can be a warning that tough times are ahead.
In Black & Decker's case, Archibald's decision to cash in his stock options is "not a red flag, not a concern," CIBC Oppenheimer analyst R. Scott Graham said.
Graham, who declined to comment on his outlook for the company, put a "buy" rating on the stock March 2, according to a Bloomberg News roster of analysts' ratings.
Black & Decker shares have slid about 10 percent since the beginning of the year and are down about 23 percent from their 52-week high of $65.50, reached July 14.
However, 10 analysts rate the stock a "buy" and one a "hold," according to Bloomberg.
CIBC Oppenheimer's Graham said Black & Decker told analysts that Archibald exercised the options and sold the shares to diversify his personal portfolio, for estate-planning purposes and to finance his children's education.
As of Dec. 31, Archibald had $45.58 million in options that were eligible for exercise and another $1.8 million worth of restricted options that cannot yet be executed, the proxy said.
In addition to his 1998 salary and bonuses, Archibald also received 200,000 options that do not expire until 2008.
They would be worth $6.76 million in 10 years if the company's stock price rises 5 percent annually from the options' "strike price" of $53.718 each. If the stock climbs 10 percent a year from the issue price, they would be worth $17.12 million, the proxy statement said.
Additionally, in three years Archibald can qualify for long-term incentive awards of $368,449, $736,998 or $1.106 million depending on whether the company hits financial targets. The incentive awards are paid out in stock, granted at a price of $56.0625 each.
Pub Date: 3/17/99