Joseph Galli said it wasn't about money.
But with his options underwater and a recent bonus in his pocket, the
president and chief operating officer decided to move back east to take the top job at the hot business-to-business firm
"This is a case where things changed and my personal situation evolved to where I did want to head back east," Galli said in a conference call Tuesday. He's originally from Pittsburgh and will work at VerticalNet's Horsham, Pa., headquarters outside Philadelphia. "It just didn't work out." (
wrote earlier Tuesday about the move.)
Despite leaving a potentially lucrative employment contract behind, Galli said his departure doesn't signal a lack of confidence in Seattle-based Amazon's future. But it does look like Galli knows something about timing, leaving a company on the way down to join one on the way up. There are growing doubts about whether Amazon ever will reach profitability, which has shown up in its weakening stock price. Meanwhile, VerticalNet is considered an up-and-comer in the exciting world of companies trying to help businesses use the Internet to purchase goods and services. And its stock, though well off its high for the year set in the spring, is up more than 50% just this month.
Leaving it on the Table
"He left a lot on the table, but it makes sense," said one New York-based headhunter who reviewed the terms of the contract. "Amazon's stock is going down and VerticalNet's stock is going up. It's an easy trade."
VerticalNet likely paid out the remainder of Galli's employment agreement, or gave him a deal similar to his lucrative Amazon package in his new job, says the headhunter. VerticalNet representatives didn't immediately return messages seeking a comment.
Amazon offered Galli a $7.9 million signing bonus for coming to the company in June 1999, according to documents filed with the
Securities and Exchange Commission
. But it didn't actually give that to him in a lump sum. Rather, it split it into three payments. The first payment of $2.9 million came last June when he joined the company. The second payment came just a month ago, on June 24, for $3 million.
Because that payment was based on Galli staying for another year, he'll have to repay most of it. But still, if his contract is honored -- and Galli said it would be -- he'll end up keeping $250,000 of that bonus. That's in addition to the original $2.9 million bonus, what he earned on his $200,000 annual salary, and another $100,000 for entering into the agreement in the first place.
And There Was Stock, Too
The cash wasn't the only incentive Galli had to stay at Amazon. He also had a boatload of Amazon options coming to him -- 3.92 million shares over 20 years, the documents show. But those options are currently worthless, because the price of Amazon's stock is now lower than what Galli would have to pay to exercise his options. Galli's price to exercise his options was 57 61/64. After selling off on news of Galli's departure, Amazon's share's closed down 1 1/8, or 3%, at 37 5/8 on Tuesday.
But even with those shares underwater, Galli still had reasons to stay at Amazon. If he stayed until June 2004, his contract provided for Amazon to pay him another $20 million bonus over seven years, minus the value of his exercised options. If those options were underwater, he would have been paid the full $20 million over that time frame.
So in the end, Galli likely left $4.75 million in upfront bonus money on the table, 3.8 million unvested options, and a guaranteed $20 million if those options remained worthless.
But Galli insisted that he didn't leave because of issues at Amazon.
"I think the company has incredible long-term prospects," he said. "I feel like moving away from Amazon now won't have any effect, except that they'll move faster."
Go East, Young Man
VerticalNet, meanwhile, jumped when it learned recently that Galli was interested in moving back east. Mark Walsh, who will leave his CEO post to Galli and take the chairman's spot, said he didn't want to pass up the opportunity to bring a talented executive aboard. VerticalNet has been on an acquisition spree and needed a manager who could handle quick growth. Galli, with 19 years at
Black & Decker
before Amazon, fit the bill.
The pair had more detailed discussions while attending the
The Industry Standard's
in Laguna Niguel, Calif., last week. Walsh declined to give more detail.
Galli, who reportedly ducked out of a position he had already accepted at
last year to join Amazon, said he shouldn't be considered a job hopper.
"I think that after staying 19 years at Black & Decker through seven different management structures, it would be hard to classify me as a job hopper," he said. "I'm not building a resume, I'm building my life and career. I hope this works out for the next 30 years."
That's a very long time. Especially on the Internet.