Treasury Nominee Miller May Get $15 Million on T. Rowe Options

Dec. 1 (Bloomberg) -- U.S. Treasury Department nominee Mary Miller stands to get about $15 million exercising stock options earned during a 26-year career at T. Rowe Price Group Inc. if she’s confirmed by the Senate, according to her federal financial disclosure.

Miller, director of the fixed income division at T. Rowe, pledged to cash in and then divest more than 585,000 options after she becomes assistant secretary for financial markets. That income would come on top of $3.2 million in pay and $5.1 million from exercising other T. Rowe stock options, both earned in 2008 and 2009 through September, the form shows.

Miller would be one of three multimillionaires from the financial services industry nominated for a top Treasury post this year. While the payout dwarfs the earnings of the average American household, it reflects her tenure at the Baltimore- based asset management firm and isn’t the type of Wall Street windfall criticized in Congress and by President Barack Obama himself, executive pay experts said.

“That’s real money,” Richard V. Smith, head of the executive compensation practice at Sibson Consulting, a division of the New York-based human-resources firm Segal Co., said of Miller’s potential options income. “But a lot of the guys in the big investment banks, they get that every year.”

Historically, the Treasury has drawn talent from Wall Street, hiring bankers and others who’ve made millions. Treasury Secretary Timothy Geithner’s predecessor, Henry Paulson, amassed a fortune of more than $500 million in a career at Goldman Sachs Group Inc. and installed several others from the firm at the department, including Undersecretary for Domestic Finance Robert Steel.

Academics, Lawyers

As the $700 billion bailout soured many lawmakers and voters on the banking industry, Geithner turned more to academics and lawyers to fill his upper ranks of Senate- confirmed appointees.

Miller declined to comment, said T. Rowe spokesman Edward Giltenan. A Treasury spokeswoman also declined to comment.

Miller had a confirmation hearing on Nov. 20. She would be Geithner’s point person on managing the country’s finances, coordinating policy with debt markets, and overseeing federal, state and local finance. The Treasury plans to sell as much as $2 trillion in government debt in the fiscal year that ends Sept. 30.

Retaining Talent

Options, which companies use to attract and retain talent, let workers make future purchases of stock at a set price. Once an option vests, or matures, the employee can buy the underlying share at that exercise price, pocketing any gain in the stock since the grant date.

Over the past few years, stock options have faded as a preferred method of compensation, replaced by many companies with restricted stock. Unlike options, which only have value if a stock goes up, restricted shares are given to an employee after a vesting period so they are worth whatever the company’s share price is at that time.

Giltenan said T. Rowe uses a combination of stock options and restricted stock to compensate its employees.

Miller, 54, rose through the ranks since 1983 at T. Rowe, where she started as a municipal credit analyst.

Shares of T. Rowe, which has $366 billion under management as of Sept. 30, are down 20 percent since the start of 2008. The Standard & Poor’s 15- member index of asset managers and custody banks is down 40 percent over the same period.

Miller’s disclosure, required for top U.S. officials, also shows that she holds $25 million to $50 million in the firm’s common stock. She signed the form Sept. 28 and it was approved by the U.S. Office of Government Ethics in October.

Stock-Option Awards

Miller has 19 different option awards under the T. Rowe plan, the form shows. Eleven of those have shares that are vested and are in the money. The rest are either above the company’s current stock price or won’t vest for some time.

Miller indicated on her disclosure that she plans to exercise the shares that are worth money and then divest all of her T. Rowe stock within 90 days of her Senate confirmation. She will forfeit any options that aren’t yet vested.

If Miller cashes in the unexercised, vested options -- on more than 585,000 shares -- she would make a $14.9 million profit, according to calculations using yesterday’s closing share price of $48.93.

She’s also leaving about $1.8 million of options that are already in the money, but not yet vested, on the table. Miller would give up additional options that are priced above the current share price.

T. Rowe is slated to pay Miller an annual bonus, pro-rated for the months she has worked in 2009, the disclosure document said. She estimates that payment to be between $1 million and $5 million.

The Senate Finance Committee hasn’t yet scheduled a vote on Miller’s nomination, which also needs to be approved by the full Senate.

To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net.