Advanced Micro Devices: Company Continues Practice of Excessive Stock Awards Even as Prior Awards Pay off at High Levels

Annual Meeting: May 18, 2022

Total compensation for Lisa Su, Chair, President and Chief Executive Officer, was $29,498,107. This includes a stock award valued at $19,929,804. The footnotes to the summary compensation table report on how that figure was estimated, “The grant date fair value of the PRSUs is determined using a Monte-Carlo simulation model and based upon a discounted cash flow analysis of the probability-weighted payoffs of a share-based payment assuming a variety of possible stock price paths and represents the estimate of the most probable aggregate compensation cost to be recognized over the requisite service period determined as of the grant date under ASC Topic 718.” This dense language is difficult for shareholders to evaluate with any precision.

However, one thing we can tell from other footnotes in the proxy statement is the value of past grants, of which there were many. In 2019 Su received a stock award with a then-estimated value of $53,176,357. From a footnote to the “outstanding equity awards table” we can tell that that award was worth $226,573,410 as of December 25, 2021. Specifically the linked footnote notes that that amount – four times the value estimated in the prior proxy – “Represents a Value Creation Equity Award at 200% (the “earned PRSUs”) which will vest 50% on each of the third and fifth anniversaries of the grant date of August 9, 2019.”

A large number of shareholders – nearly 30% - voted against the package that year. In opposing the 2019 package, Calvert Research and Management noted “There are unmitigated concerns raised by the magnitude of a special performance-based equity award granted to the CEO, which is over twice the median total pay of peer CEOs. Concerns over pay magnitude are amplified, given that the CEO's special award was supplemental to her already relatively-large annual LTI award and there is no indication that the CEO will be ineligible for annual or one-time equity grants in the future.”

These concerns remain true and are amplified by the current proxy statement. In looking at the current value, it appears that the performance metrics were set too low on the 2019 grant if that award is valued at 200 percent. Of more concern, however, is the issue that such awards are not needed to retain the CEO. This is a telling example of the excessiveness of the packages for overpaid CEOs.