3D Systems’ New CEO’s Compensation Hints At The Company’s Strategy

Readers may recall that 3D printing giant recently installed a brand new CEO. Now we know his motivations. 

As a publicly traded company, 3D Systems is required to file numerous reports with US federal agencies, including the Securities and Exchange Commission (SEC), one of which just happens to be the employment agreement with Vyomesh Joshi, the new CEO. 

Why is this important? Isn’t peeking at such information just curiosity? 

Definitely not! CEOs are a critical link between the shareholders of the company and the strategy executed by the company. The company’s board of directors (the representatives of the shareholders) isn’t running the company day-to-day. Instead, they carefully select someone they believe will be able to execute what they want to do (their strategy) as CEO to carry it out. 

Then they make sure by providing compensation and bonuses to motivate the CEO towards the strategic goals of the company. 

This means we can read through the agreement and hope to derive some clues about what 3D Systems wants to focus on in the next while. Here’s what I noticed in the agreement:

Term: The agreement is for a two year employment period. That may seem short, but it can be renewed. This may be a way for their board of directors to bail out if Joshi isn’t working out after two years. Of course, there’s also a clause permitting early termination for a number of obvious situations. 

Salary: Joshi’s base salary is specified at USD$925,000 per year. That may seem like a lot to most readers, but it isn’t out of line for a CEO of a large company such as 3D Systems. 

Bonuses: The company’s compensation committee (a subset of the board members) can award Joshi a bonus of up to 100% of his base salary (USD$925,000) based on meeting a “Target Performance Bonus”, which is unspecified and may vary from year to year. 

Stock: This is the interesting part. Joshi is awarded 150,000 shares of the company in three installments over the term. In the event the stock price exceeds USD$30 for 90 consecutive days, Joshi is further awarded 50,000 shares, then worth USD$1.5M, nice! 

Wait, there’s more: in the USD$30/share scenario, Joshi is awarded an additional 250,000 stock options. This means Joshi is permitted to buy up to 250,000 shares at a price lower than USD$30, which isn’t specified, but could be very low, thus pocketing the difference. 

Finally, there’s another target of USD$40 per share, which, if met, yields Joshi another 25,000 shares (USD$1M) and another 250,000 stock options. 

It’s not clear to me what the grand total of all this could be, should Joshi hit all those targets and stock price levels. However, a report on Motley Fool estimates it as much as USD$23.7M, which is quite a haul - and substantially more than the base salary. 

So what does all this mean? 

Clearly, the shareholders of 3D Systems are significantly concerned about their stock price, which has plummeted from values near USD$100 in 2014 to lows under USD$10 earlier this year. Currently, the stock is just under USD$20, with growth likely driven by various cleanup executed last fall by the interim CEO and certainly the arrival of Joshi. 

We can expect Joshi to spend a majority of his efforts focused on activities that drive the stock price up. This could mean expense savings through additional consolidations of less-profitable ventures to reassign resources on more-profitable activities. It could also mean increases in revenue by introducing new products, adjusting pricing or simply by streamlining their sales and distribution networks to get more products to more customers more easily. 

I’m expecting a lot of change. 

Via Motley Fool and EDGAR

General Fabb

Kerry Stevenson, aka "General Fabb" has been writing Fabbaloo posts since he launched the venture in 2007, with an intention to promote and grow the incredible technology of 3D printing across the world. So far, it seems to be working!

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