Like fellow NBC Internet (NBCI) shareholders, CEO Will Lansing may be sad that since his arrival last March through today's announcement of the company's sale, NBCi's shares have slid about 95%.
Unlike other shareholders, though, Lansing is getting a free house for his troubles.
Following NBCi's announcement Monday that it had agreed to be bought by
NBC unit, Lansing confirms he'll be forgiven a $4 million loan he received from NBCi last year to buy a house in the San Francisco Bay area.
The forgiven loan, which Lansing received as he moved from Minnesota to California to take the CEO job, is an example of how, though many Internet companies have seen their prices plummet over the past year, executives who received substantial cash compensation haven't suffered quite as much. Since March 27, 2000, the day that Lansing took the job, NBCi's shares have fallen from a closing price of $50.25 to Monday afternoon's price of $2.14.
The deal also illustrates how companies once paid dearly for talent they hoped would steward them through a bull market. The interest-free loan, for example, was scheduled to have been forgiven anyway after three years, according to NBCi's May 2000 proxy statement; Lansing describes what's happening, in accordance with his contract, as "acceleration of the forgiveness on that debt."
In addition to the loan, Lansing signed on for an $1.7 million in salary and guaranteed bonuses annually, plus a $300,000 bonus based on performance goals. As detailed in a May, 2000, proxy filing, Lansing received $12 million in restricted stock vesting over three years; at NBCi's current price, those shares are worth about $575,000. Lansing confirms that the restricted stock will vest on an accelerated schedule, too. Lansing also was granted options, vesting over three years, to buy a million NBCi shares at an exercise price of $44.63 per share, though those options are worthless, given the shares' slide.
Lansing says he did purchase a house in the San Francisco area, but declined to say where or how much he paid. In the fourth quarter of 2000, the median price for a house in the San Francisco area rose to about $470,000, according to the National Association of Realtors, making the Bay area the priciest metropolitan area for housing in the nation.
Even when it appeared that Lansing would be around for at least three years, his pay package looked generous to one expert. Quoted in
an article in
last May, executive compensation specialist Graef Crystal termed Lansing's compensation "obscene."
Lansing, who says he'll leave NBCi after the deal closes this summer, is unapologetic about his compensation despite the brief tenure of his job and the company's performance. He characterizes the deal he received as what the market would bear when the then-CEO of
Federated Department Stores'
was recruited for the NBCi post. "When I came to NBCi, I had a number of job options," Lansing said in a telephone interview with
"The employment contract I entered into with NBCi reflected the level of compensation I would get in alternative jobs."
He also expresses regret over the stock's performance. "I'm sorry that the stock has performed the way it has. I'm as sorry as any investor." He adds, "I'm not pleased with what happened to the industry or the market. ... The market has punished us, as it has punished all our competitors. No one is happy with the stock performance."
But Lansing doesn't take responsibility for the stock's performance: "Am I sorry that the stock has fallen? Absolutely. ... I did everything I could to make it go up. We built a great product. ... I think strategically we made all the right decisions, and I feel we're victims of a market that came apart."
Under the terms of the deal announced Monday, NBC has agreed to buy the 61.4% of NBCi it doesn't own for $2.19 a share in cash. On a conference call Monday announcing the deal, Lansing called the deal "clearly the best value for our public shareholders," given that other alternatives contemplated for NBCi recently, including sales to other party and liquidation of the company's assets, didn't offer as much money to shareholders. "We're very pleased with this outcome," Lansing said.
Spokespeople for NBC had no immediate comment on the terms of Lansing's compensation.