Search giant Google Inc. GOOGL is offering a whopping $70 million pay package to its newly hired chief financial officer (CFO), Ruth Porat, for the next two years. The pay package includes a combination of restricted stock units and a biennial grant.
Porat who has been Morgan Stanley's CFO since 2010 is quitting the firm in April to take up the same post at Google. She will succeed Patrick Pichette whose retirement plans were disclosed earlier this month. Porat will start with her new job on May 26.
Once she joins, Google will shower her with stock units valued at $25 million as a new hire grant and award a biennial grant worth $40 million in 2016. The stock awards will vest in stages through 2019. As much as $25 million stock will be vested between the end of the year and 2017 while $40 million of stock will be vested from 2016 to 2019. Google is also awarding a special one-time signing bonus of $5 million to enhance her annual base salary of $650,000.
Former CFO Patrick Pichette was paid $450,000, with a signing bonus of $500,000 when he took the job in 2008. He was awarded another $500,000 cash bonus after 6 months, and yet another bonus, which took his total to about $4.3 million, excluding stock options.
As per the Wall Street Journal, his total pay package in 2013 was worth $5.15 million and $38.7 million in 2012.
As for Porat, Reuters reports say that she made $29.6 million in total compensation at Morgan Stanley from the period 2010-2013. Therefore, Google’s pay package is a luxurious reward for her giant leap from Wall Street to the Silicon Valley.
Google not only made her happy in monetary terms but pleased investors too. Investor confidence ebbed when Pichette stepped down, with shares falling 2.4% on Mar 10. However, shareholders welcomed Porat with a 2.2% boost in share price on Mar 24.
The search giant is seeing a certain amount of pressure in its display advertising business, which has been adversely impacted by consumers' varying search preferences, particularly on mobile. The advent of social networks has made matters worse.
Investors are worried about the company’s struggle to succeed in the mobile era and its inability to increase monetization on mobile devices. They are also fretting over its huge investments in technology although these are necessary to diversify its revenues.
Google could suffer until Google Play gathers momentum and it is in a position to recover costs. Google reported a huge fourth-quarter miss when its earnings of $5.50 missed the Zacks Consensus Estimate by 36 cents on revenues that missed by 2.5%. Earnings also dropped 3.3% from a year ago while increasing 12.0% sequentially.
Moreover, Google has missed estimates in the last four quarters, generating a negative average surprise of 4.12%.
The boost in share price reflects the investors’ hopes for more disciplined cost management. They hope that Google will return some of the growing pile of cash of $64 billion in the form of dividends or stock buybacks.
Given its strong product portfolio, we expect Google to overcome the hurdles with Porat’s experience and remain immensely powerful and influential.
Google has a Zacks Rank #3 (Hold). Better-ranked stocks include Bazaarvoice, Inc. BV, Globant S.A. GLOB, and 58.com Inc. WUBA, all sporting a Zacks Rank #2 (Buy).
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