Company Chief Executive Officer Bruce Nelson, for instance, saw his annual bonus jump from $1 million to $1.87 million in 2002. Other company executives also nearly doubled their bonuses last year.
Meanwhile, Office Depot's stock dropped more than 23% over the course of the company's 2002 fiscal year.
"Salary survey work performed for us by a reputable outside consultant indicates that Mr. Nelson's base salary is competitive with the salaries paid to similarly situated executives at other similarly sized companies and is not excessive," the company's compensation committee reported in Office Depot's proxy statement, which was filed on Friday. "We believe that his overall compensation package closely aligns his interests with those of our shareholders."
Despite the decline in Office Depot's share price and relatively flat sales, the company did increase its earnings by about 35% last year. The company earned $310.7 million, or 98 cents a share in 2002, up from $201 million, or 66 cents a share, the previous year.
Nelson's bonus wasn't the only compensation increase he saw last year. Office Depot paid him a $3.8 million retention bonus last year; Nelson received $777,000 in deferred bonus pay the year before. Meanwhile, Office Depot bumped up his other annual compensation, which includes a $24,000 yearly allotment for car expenses, up to $84,197 from $69,210 the year before. And Office Depot paid for Nelson to use a corporate airplane for personal use, estimating that he racked up $65,168 in expenses doing so.
Last year, Nelson exercised 271,480 stock options worth $1.98 million. He didn't exercise any the year before.
But not all of Nelson's compensation increased. His salary stayed at $1 million in 2002, the same as it was the year before. Meanwhile, he received 825,000 stock options last year, 175,000 fewer than in 2001.
Some of Nelson's executives colleagues also fared well in 2002. Robert Keller, president of Office Depot's business services group, earned a bonus of $582,400 last year, compared with a $300,000 bonus the year before. Although Keller's salary went up slightly, to $480,000 in 2002 from $450,000 in 2001, other perks increased more dramatically.
For instance, Office Depot paid Keller $70,769 in other, undefined annual compensation in 2002; he didn't receive any such pay in 2001. And the company awarded Keller 150,000 stock options in 2002, compared with 100,000 in 2001.
CFO Charles Brown also saw his bonus nearly double in 2002, going from $255,000 the year before to $504,000. Brown's salary rose from $351,923 to $450,000 and received $65,348 in other, undefined compensation, compared with none the year before.
But Brown's stock awards declined last year. Office Depot gave him 58,750 stock options in 2002, down from 100,000 the year before. In 2001, Office Depot awarded Brown $358,000 worth of restricted stock; last year, Brown didn't receive any restricted stock.
Executive compensation will be among the topics up for discussion at Office Depot's annual shareholder meeting later this year. Among the shareholder proposals up for a vote is one that would urge the company to link options awards to how well the company's stock performs in comparison with shares of its corporate peers.
Another shareholder proposal would request that the company avoid receiving consulting services from the same accounting company that performs its audit. A third proposal would urge the company to abandon its so-called poison pill plan to prevent hostile takeovers unless it is approved by shareholders.
Company directors have urged shareholders to vote against all three proposals.