For this CEO, a big gamble is paying off: Motorola Solutions' Brown is poised to cash out more stock | MSI Message Board Posts


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Msg  15 of 15  at  3/10/2022 7:09:20 PM  by

jerrykrause


For this CEO, a big gamble is paying off: Motorola Solutions' Brown is poised to cash out more stock options on top of the $296M he's pulled in so far

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For this CEO, a big gamble is paying off: Motorola Solutions' Brown is poised to cash out more stock options on top of the $296M he's pulled in so far

 Crain's Chicago Business; Chicago Vol. 45, Iss. 10, (Mar 7, 2022): 1.
 
 

Greg Brown is cashing in big on the gamble he made in becoming CEO of Motorola 14 years ago, when he bet that he could save a sprawling, once-dominant technology giant that already was staggering just as the economy headed into a massive recession.

The 61-year-old is closing in on a half-billion dollars in pretax gains from stock sales since 2008. He sold 200,000 shares last week for a pretax gain of $33.5 million. According to securities filings, he plans to sell 869,229 more shares, which would bring him an additional $134.5 million after costs to exercise options to acquire the stock.

Before last week, he already had made roughly $296 million from previous stock sales since taking the top job. The company, now known as Motorola Solutions, says Brown's after-tax take so far is closer to $175 million.

Brown has profited more from stock sales than a handful of peers who have been running other big Chicago public companies for at least a decade, security filings show. The closest is Debra Cafaro, who has been CEO of real estate firm Ventas since 1999. Her pretax stock gains total $208 million. Tom Wilson, CEO of Allstate since 2007, has gains of $175 million. Scott Santi of Illinois Tool Works has racked up $127 million after costs to acquire shares since 2012. Miles White, who was CEO of medical-device maker Abbott Laboratories for 21 years, had a pretax gain of $124 million by the time left the chairman's role in December. Terrence Duffy, who has been CEO or chairman of CME Group since 2002, tallied a gain of $63 million before taxes.

Brown's haul reflects both the long journey for him and for Motorola, and the life-changing financial rewards that make the job of public-company CEO so enticing. His windfall is an extreme example of how the compensation strategies that public companies have long touted as equal parts risk versus reward can play out. Companies give CEOs huge piles of equity in the theory that they'll get rich if shareholders do, too.

Motorola's stock price has climbed 237% to $221.57 since Brown became CEO on Jan. 1, 2008, according to Bloomberg data. The S&P 500 is up 197% during that time.

"The criticism of options is an executive could do extremely well simply because the market went up during this time and the economy was strong. It could be just pay for luck," says David Denis, a professor at the University of Pittsburgh.

Brown's results over his full tenure put him in the middle of his peers. CME Group shares are up 3,340% during Duffy's 20 years at the top, far outpacing the S&P's 381% gain, according to Bloomberg data. Abbott Labs increased 513% under White, compared with 283% for the S&P. Ventas rose 1,294% during Cafaro's tenure, compared with a 224% rise in the broader market. ITW shares have climbed 262% since Santi became CEO, compared with 215% for the S&P.

Brown declined to comment. But the company says a better measure of his performance is Motorola's ascent since 2011, when Brown spun off its money-losing mobile-phone business, now known as Motorola Mobility. Shares are up 497% since then, compared with 243% for the S&P 500, according to Bloomberg data. Including dividends, Motorola's total shareholder return is 625%, compared with 328% for the S&P. (The total return doesn't include the value of Motorola Mobility, which was acquired by Google in 2012 for $12.5 billion.)

TURNAROUND PROJECT

Carl Icahn, an activist shareholder who waged a fight with former CEO Ed Zander to break up Motorola and ultimately prevailed, says Brown earned whatever stock riches he's reaped. "Motorola wouldn't have been the success it's been if not for Greg," says Icahn, who sold much of his stock shortly after the split. "I'm not against CEOs making a lot of money if the stock goes up. The stock went up. Greg took a risk. He also operated the company really well."

Corporate governance expert Charles Elson says he doesn't begrudge Brown accumulating stock wealth. But he doesn't like the idea of a CEO selling his shares. "A hundred-fifty million is a lot to take off the table while you're still CEO," says the University of Delaware professor. "It's not the greatest signal if you sell. If you believe the company has a bright future, why are you selling now? Should others take your lead?"

The company notes that the stock Brown is selling, as with previous sales, involves options that are set to expire. Options to acquire stock are worthless if not exercised by their expiration dates, but executives aren't required to sell the shares upon acquisition.

Brown still holds options to acquire 2.8 million shares at strike prices ranging from $51.33 to $81.37, which are worth nearly $400 million after acquisition costs.

He occasionally has drawn criticism from shareholders for his pay, particularly before the stock took off in recent years. But Brown generally has kept his wealth out of the spotlight, until tabloids reported that pop star Bruno Mars played at his son's wedding last fall on Cape Cod, where the CEO owns a vacation getaway. Mars reportedly gets $3 million for private events.

Motorola was a turnaround project when Brown, then 47, was promoted to replace Zander, a former software executive who rode the Razr's success until rivals took over the cellphone industry.

The $36.6 billion revenue colossus was sinking with the rapidly declining fortunes of its phone unit. Brown spun off the phone and cable set-top box businesses and sold other divisions to focus on hand-held emergency radios and dispatch equipment. The company shrank to $5.7 billion in revenue and 14,000 employees in 2015, but rebounded to $8.2 billion in sales and nearly 19,000 employees last year as Brown acquired software, services and video-technology companies.

Many of the thousands of Motorola alumni in the Chicago area have lamented how the company has dwindled in size and prestige. James Schrager, who teaches corporate strategy at the University of Chicago's Booth School of Business, says it was the right decision. "You can fix some problems. Other times you have to sell or close other ones," he says. "Greg took a sober assessment of the risk in keeping it together. (Motorola) could have been Kmart. It could have been Sears."

STOCK PAYOUT

Dave Novosel, a bond analyst who has followed Motorola for years at Gimme Credit, says free cash flow has more than doubled since the breakup to about $1.6 billion a year. The company's pretax profit margin has risen from 21% to 26%. Since 2015, after the sale of its bar-code scanner business to Zebra, Motorola's earnings have nearly doubled to $1.25 billion from $643 million. The company has bought back $13.9 billion of its stock since 2011.

Brown's stock paydays largely stem from large option grants he received in connection with becoming CEO in 2008, completing the breakup of the company in 2011, and in 2015 when private-equity firm Silver Lake Partners invested $1 billion in Motorola through a convertible-debt deal.

"They gave him an option package. If the share price appreciates, you're going to make a pile of money," says Jason Petitte, an analyst at Chicago-based Kovitz Investment Group, a money manager that bailed out of Motorola during the post-Razr meltdown before buying back in a couple of years ago. It now holds about 500,000 shares. "The shareholders have done well along the way."

 
 
 
 


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