Pharmas Market with Mike Huckman

What's In A Number At Boston Scientific


Ray Elliott put in less than six months on the job last year at Boston Scientific as the medical device maker's new CEO. But, according to "The New York Times," in that short amount of time Elliott received enough total compensationto make him the second-highest paid head honcho behind only Oracle's Larry Ellison (albeit a distant #2.) All in, Elliott reportedly received $33.4 million.

If you're interested in going behind the numbers, you can read all about it in BSX's SEC filing under the "Executive Compensation" section. Elliott's base annual salary is $1.2 million. The company also gave the former Zimmer Holdings CEO a sign-on bonus of a million-and-a-half bucks. Elliott also received nearly a million dollars to pay for his move to Boston. And, oh, they gave him a $78,000 "cost of living allowance."

But things may not be quite as they seem.

The overwhelming majority of Elliott's 2009 total compensation was in stock options that are under water and probably will be for a pretty long time. The deal gets rather complex and detailed, but the company granted him 3.4 million options that vest in installments over four years and with an exercise price of $9.51 a share, which was the closing price on the day he got them. The stock right now is worth a little more than seven bucks a share. There's also a bunch of performance-based rewards built in, including one-and-a-quarter million so-called "deferred stock units" that are only good if the stock stays above 20 bucks for at least 10 straight trading days. (The minimum stock value tied to Elliott's "DSUs" goes up to as much as $30 over time.) Again, BSX is trading for seven-dollars-and-change today.

Regardless of whether the $33.4 million figure is inaccurate or misleading, the timing and publicity over the rather eye-popping amount couldn't be worse for BSX. The company is reeling from a recall of and brouhaha over a redesigned implantable cardio defibrillator. Investors have punished the stock and rewarded the shares of Boston Scientific's top competitors Medtronic and St. Jude Medical . Given the current situation, Elliott certainly has his work cut out for him. Whether he's adequately, over- or under-compensated for that work is for shareholders to decide.

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