Since 2007, Masimo Corp. founder Joe Kiani’s employment contract included a combination of benefits most chief executive officers can only dream of.
He was guaranteed 300,000 stock options annually, and he could trade those options for full-value shares in some scenarios. He’d get a golden parachute if his company were bought, even if his employment wasn’t terminated, and the Irvine, California-based medical device-maker would pay his taxes on that windfall.
After three years of negotiations, Kiani finally relinquished those benefits in 2015, according to the company’s proxy statement. After 2017, Kiani will no longer be entitled to the guaranteed grants of stock options. In return, Masimo awarded him $112 million in stock and $35 million in cash that would pay out if his employment is terminated before 2018. The company also paid $1.4 million in legal fees that Kiani accrued during the negotiations.
"It looks like he had good lawyers negotiating quite well for him," said Jeff Visithpanich, managing director of compensation consulting firm Johnson Associates.
Saving Millions
The new arrangement would shrink payouts to Kiani if Masimo is acquired, according to the company’s March 16 statement.
“I am happy that we were able to reach a new agreement that we believe will save Masimo shareholders millions of dollars,” Kiani said on Thursday.
In the last five years, investor support for Masimo’s pay practices has averaged 47 percent, even though Kiani controlled 13.7 percent of the medical device-maker’s shares as of March 7. Investors had “concerns regarding our CEO’s prior employment agreement,” the company said in its proxy dated March 16.
Typically, investors are happy to leave compensation decisions to boards. The average support level for pay practices at companies in the Standard & Poor’s 500 Index is 92 percent, according to data compiled by Bloomberg.
Investors’ View