Dndodd re is compensation too high you said:
..."Is the compensation to high? I look at their Salaries and from my fortune 200 experience I say no. Bonus, I don't have enough information. How the goals are set etc. But the Bonus and LTIP does not look excessive to me."
I would have to completely disagree with your conclusion on IDCC's compensation. I believe it is excessively high for a small-cap company. IDCC is not a Fortune 200 company, or a Fortune 500 company for that matter. IDCC's market-cap is still under $1 billion. This makes IDCC a small company in relative terms.
IDCC's new compensation plan just added $3.9m of additional recorded incremental expense in the first quarter of 2005 according to the 10Q, or $15.6m estimated annualized amount for the year 2005. A total $15.6m for the year 2005 divided by about 100 employees subject to the new LTIP comp plan is an average of $156,000 additional expense per eligible employee, on top of the generous Base Salary and Bonus plan.
For a small company, I can not see anything reasonable with this additional increase per eligible employee for about one third of IDCC's existing workforce. It is excessive IMO. (2005 is an overlap year, and the LTIP expense should reduce somewhat in 2006 from 2005 levels per the 10Q). An excerpt from a recent post of mine after reading the latest proxy as follows:
According to the latest proxy however, the old Bonus Plan was not done away with or superceded or even reduced by the new LTIP. The Bonus Plan was amended in September 2004. The five highest paid executives at IDCC received significantly more bonus in 2004 ranging from 27% to 52% increase over their 2003 Bonus amounts. The 2004 Bonus amounts ranged from 50% to 69% of the executives base salaries. The new compensation plan was completely incremental additional compensation for the executives on top of the very generous and increased bonuses.
The additional incremental compensation from the new LTIP compensation plan as follows from the proxy:
“For the 2004–2006 cycle, the percentage of base salary on which the RSU awards are based for Goldberg, Merritt, Briancon, Tilden, and Fagan are 120%, 100%, 90%, 100%, and 90% respectively.” (My comment: this LTIP is like getting a 100% raise for the executives)
The cash portion of the new LTIP was shown in a different and later table in the proxy, and was exactly equal to the RSU amounts. It appears that the cash portion was not actually paid in 2004, and was thus not included in the earlier total compensation table for these five executives for 2004. BTW the second LTIP cycle began on January 1, 2005 and will overlap the 2004-2006 first cycle.
One example of excessive employee compensation IMO is Rich Fagan. CFO Fagan earned total compensation of $725,651 in 2004, composed of base salary of $270,930, bonus of $137,929, RSUs from the new LTIP plan of $158,396, and cash incentives from the new LTIP plan of $158,396. Since I am an accountant, I feel that I can make somewhat valid observations re Mr. Fagan’s compensation. I have seen some of his work product in the SEC filings and have listened to him on the CCs. IMO there is no way that he should be compensated $725,000 per year.
I have had problems with IDCC's compensation levels for a good while. A excerpt from an email that I sent to IDCC's Directors in January 2003 re Fagan and Tilden's compensation levels as follows:
Usually higher-paid CFOs deal with the large, highly complex businesses. Manufacturing and merchandising businesses are much more complex accounting-wise, than are service businesses. IDCC does not have complex manufacturing operations or merchandise inventories either. Neither does IDCC own extensive fixed assets that increase accounting complexities. IDCC does very little billing and invoicing, and has to keep up with only 25 licensees/customers rather than thousands upon thousands of customers. Therefore IDCC has minimal receivables to oversee with the resulting extensive collection efforts needed by most companies. IDCC has virtually no debt, so debt management is not an issue for the IDCC CFO. About the only accounting issues at IDCC are payroll, employee expense reports/reimbursements, SEC financial reports/filings, and income tax returns. It appears to me as though Mr. Fagan is being paid an awful lot of money for a relatively simple accounting job, all things considered.
The job performances of certain executives at IDCC are difficult to analyze due to lack of knowledge about specific job duties. Rip Tilden's position as COO comes immediately to mind. I'm not sure if anyone outside of IDCC is quite sure exactly what Rip's job now entails. We do know that it now excludes individual shareholder contact and relations. The press release announcing Rip's promotion stated the following:
"As Executive Vice President and Chief Operating Officer, Mr. Tilden will be responsible for leading the Company's initiatives to achieve excellence in operating performance. He will manage and coordinate ongoing operations to create a competitive advantage for InterDigital to ensure high levels of performance, customer satisfaction and superior value creation."
I'm just not quite sure what IDCC's operations are? IDCC does not have manufacturing operations or merchandising operations that most COOs would be in charge of. IDCC has licensing operations and engineering operations. However, Mr. Merritt is in charge of the licensing subsidiary, and Dr. Briancon is the Chief Technology Officer in charge of the engineering operations. What types of operations are left for Rip to oversee?
Rip used to oversee communications and public relations. Many shareholders think that IDCC's past communication and public relations efforts produced minimal results. Mr. Tilden is an excellent speaker, and I thought he might be in charge of public communications. However, Rip no longer participates in even the quarterly Conference Calls.
AI
