Meg Whitman gets 1.9 million HP stock options, Apotheker wins too

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Meg Whitman is taking a $1 annual salary for her position as the new chief executive of Hewlett-Packard Co. But don’t think she’s working for peanuts.

As part of her compensation package, Whitman was also awarded the option to buy nearly 2 million shares of HP stock, which eventually could bring her a windfall of tens of millions of dollars. As with many executive-level options packages, however, the shares won’t vest immediately: Whitman won’t be able to cash in at least 900,000 of them in until a year from now.

The vesting of these shares is also tied to the performance of the stock price -- if HP’s stock doesn’t achieve certain levels of growth, in other words, Whitman can’t use them.

Or can she? If you look at the severance agreement that recently sacked HP CEO Leo Apotheker got, you’ll see that a CEO can still reap huge stock payouts even if he gets fired for lackluster performance.

Apotheker, who presided over a nearly 40% decline in the price of HP stock, is walking away with a $7.2 million cash severance, as well as a $2.4 million annual bonus and $3.5 million in stock. But he might also reap a windfall of another 425,000 shares(worth $9.7 million if cashed in today), provided the company does well ... under Whitman.

[Correction, 2:30 p.m.: An earlier version of the post suggested that Whitman’s stock options, if exercised today, would be worth $45 million. In truth, the value of stock options depends on the stock price having increased between the time the options were awarded (i.e. today), and the time when they are exercised. Though Whitman may eventually have the option to buy 1.9 million shares of stock at today’s price (costing a total of about $45 million), she would only see a profit if the stock price rises between now and then, allowing her to sell the stock and collect the difference. If the price rises by 40%, for instance, Whitman could exercise her options to realize a 40% profit, or about $18 million. Also, the earlier post said Apotheker would be awarded $3.5 million in stock options -- that sum will come from a stock grant.]

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-- David Sarno