Jimlur re initial compensation of new directors
Jim my reference to exercise price only applied to the stock options, not to the RSUs, as follows:
..."From the December 2003 F4 filings, they each received 6,000 RSUs and 2,000 stock options with an exercise price of about $19.60, the closing stock price on the date of grants in December 2003.
The 6,000 RSUs initially received by each new director are free stock shares when vested, there is no exercise price and thus no cost associated with RSUs. The "accounting value" of an RSU is the market price of the underlying stock on the day of grant, which in December 2003 was about $19.60. Therefore the RSUs are valued on the date of grant at $19.60 x 6,000 = $117,600 each new director. Of course the ultimate "economic value" of these granted RSUs will be whatever they ultimately sale the free 6,000 shares of IDCC stock for in the future.
The 2,000 stock options that each new director also received do have an exercise price and an ultimate cost equal to the fair market value of the underlying stock at the date of grant, ie about $19.60. However, they have ten years in which to exercise the stock options at this fixed exercise price. What do you think IDCC's stock price will be ten years from now?
The "accounting value" for the right to exercise at a fixed price for ten years in the future is difficult to determine. There are various accounting valuations method for stock options granted, but the most commonly used valuation method is the Black-Scholes method. In IDCC's latest 10K and Annual Report, the Black-Scholes valuation method for an IDCC stock option granted in 2003 is $15.99 per option. Therefore the current "accounting value" for the granted IDCC stock options is $15.99 x 2,000 = about $32,000 each new director. Thus each new IDCC director received an initial compensation package for agreeing to serve on IDCC's Board of Directors of about $150,000 each.
This initial compensation does not include their normal annual base compensation. The way I interpret the revised annual base compensation is that each outside director now earns 4,000 vested RSUs per year, plus cash compensation of $25,000 each, and additional cash compensation of $5,000 for each director committee served on, if not a committee chairman. If chairman of a director committee, then the additional cash compensation is $15,000, except for chairman of the audit committee which is $30,000 more.
IMO outside director compensation at IDCC is way out of line and very excessive, especially for a small-cap company of less than $1 billion. IDCC's annual base compensation to outside directors is comparable to, and even exceeds, many of the largest corporations in America. When you throw in Harry's additional annual compensation for services as board chairman and additional compensation for Roath for unspecified services, the compensation of IDCC's outside directors goes off the charts. It is unconscionable, and reflects pure selfish greed IMO. Greedy fiduciaries is a contradiction in terms, but it appears that is what we are stuck with.
AI
