New IBM Chief Could Reap $8.5 Million in ’93 : Technology: Meanwhile, the company moves ahead with layoffs of 2,600 employees at three New York plants.

NEW YORK —  IBM’s new chairman and chief executive, Louis V. Gerstner Jr., could receive up to $8.5 million this year for accepting the challenge of turning around the troubled computer company.

Separately, IBM laid off 1,400 employees at two manufacturing plants Tuesday, and continued notifying 1,200 workers of layoffs at a third facility. The layoffs were among the first in IBM’s 79-year history.

The cuts by the computer maker at plants in Kingston, Poughkeepsie and East Fishkill in New York’s Hudson Valley reflect the sharp decline in IBM’s historical cash-cow business: big mainframe computers.

Under the package for Gerstner, approved Tuesday by IBM’s board of directors, he will receive a 1993 salary of $2 million, an incentive of $1.5 million tied to IBM’s performance and a one-time payment of about $5 million to offset income and benefits he forfeited by leaving RJR Nabisco.

Gerstner will also receive IBM stock options that could reap him millions more if his performance can boost the company’s languishing share price.

Executive compensation experts said Gerstner’s $2-million annual salary is among the highest in corporate America.

“Certainly the salary is a lot,” said Judy Fischer, publisher of Executive Compensation Reports, a Fairfax, Va., newsletter. “The stock options--that’s what we would call a mega-grant.”

The generous pay package also represents a sharp departure from IBM’s traditional practice under which its chairman received a modest salary, outright stock grants and the potential for a large performance bonus.

Gerstner’s salary is more than double the $925,000 paid last year to outgoing IBM Chairman John F. Akers, who received a $375,000 bonus despite the company’s worst performance ever. Akers was paid a total of $2.08 million in 1991.

Gerstner, former chairman and chief executive of RJR Nabisco Holdings Corp., will receive options to buy 500,000 shares of IBM stock, which fell to a Tuesday close of $50.75, from above $100 last summer.

Gerstner will be eligible to buy the IBM shares in the future at a price to be set soon. If IBM’s performance improves and the stock price rises, Gerstner can pocket the difference. For instance, if the set price is $50 and IBM’s stock rises to $100, Gerstner could make $25 million.

Gerstner’s pay represents an increase over the $3.06 million in salary and compensation he earned at RJR Nabisco in 1992.