Apr 25, 2016 | By Alec

In October 2015 the tech world was caught off-guard by the sudden departure of 3D Systems’ CEO Avi Reichental, who had steered one of the world’s most important 3D printing companies for twelve years. His successor Vyomesh Joshi was revealed at the beginning of April, and his compensation package contains some clues on what the new CEO’s intentions might be. For over the next three years, Vyomesh Joshi could make as much as $23.3 million, largely through excellent stock options that kick in if 3D Systems stock trades above a certain price for more than 90 days at a time. Joshi’s main goal, it therefore seems, is to drive up 3D Systems’ stock.

The appointment of Joshi itself wasn’t so unusual. Having worked at HP from 1980 to 2012, he retired as executive vice president of HP's imaging and printer group. While leading that $26 billion group, the printing department’s operating profits doubled over an 11-year period. With a proven track record, he therefore looks like a long-term candidate that brings some security and stability back to 3D Systems.

That’s definitely something the company could use, as 3D Systems’ shares haven’t exactly been stable over the last few years. The shares peaked at $97.25 in late 2013, but the company went through some hit-and-miss acquisitions over the two years that followed and Reichental’s tenure ended in something of mini-crisis mode. Among others, staff needed to be laid off, while the company’s drive into the lower-cost 3D printer market with the $999 Cube 3D printer was canceled. After the eyebrow-raising departure of Reichental, the company’s shares immediately dropped 7 percent.

Stability is therefore what 3D Systems needs, and this is reflected in the new CEO’s compensation package. To provide some contrast, Reichental earned $24.5 million over his last three full years at the helm, partly thanks to stock rewards that was vested on a predetermined time-table. In short, he received compensation regardless of how the company performed.

Joshi’s potential $23.3 million package, in contrast, is partly based on company performance. To be sure, he will also receive some pre-determined awards. Joshi’s annual salary is set at $925,000 (with a potential annual bonus of the same amount), for example. However, a significant part of the compensation package is based on performance. Among others, Joshi is given the opportunity to buy 250,000 shares at $15.85 if stock trades at more than $30 for 90 consecutive days (worth $3.5 million if sold at $30), and the opportunity to buy a further 250,000 shares at $15.85 if stock is trading at more than $40 for 90 consecutive days (worth $6 million if sold at $40). If that latter goal is reached, he will also receive 25,000 shares (worth $975,000).

Joshi’s compensation package therefore suggest that the company’s board wants to align the CEO’s interests with those of the shareholders. According to experts at fool.com, this corresponds to a 2014 study that found that CEOs receiving too large compensations suffer from a false sense of confidence. This could lead to bad financial and business decisions, which could cost the company dearly. But at the same time, tying a CEO’s own compensation package to stock could lead to a stronger focus on short-term successes, rather than on long-term prospects. By appointing Joshi (who has a history of playing the long game) with a compensation package that provides incentives for short-term success, 3D Systems seems to want the best of both worlds. Time will tell if it works out.



Posted in 3D Printer Company



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mr 3d wrote at 4/26/2016 5:55:26 AM:

Way over paid! Let him earn it for a 5 to 10 years first.

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