Rob Gillette, who resigned as chief executive officer of First Solar Inc. (FSLR) this week after boosting production capacity during a slump, collected $29.9 million for his initial 15 months on the job and may be eligible for an $8.9 million severance package.
The world’s biggest maker of thin-film solar panels rewarded Gillette while its shares dropped 60 percent from the day he started in October 2009 through Oct. 24, the day before he stepped down. Gillette’s compensation is at least 19 percent more than what Chevron Corp. CEO John Watson earned over the same period, when the U.S. energy company’s shares gained 54 percent.
Gillette’s pay, described in regulatory filings for 2009 and 2010, also included a $5 million signing bonus to lure him from Honeywell International Inc. (HON) First Solar received $3.07 billion in loan guarantees from the U.S. government to support projects using its technology, which is a rival to silicon-based solar cells made by Chinese companies led by Suntech Power Holdings Co.
“Gillette’s compensation was unusually front-loaded, so when it came time to throw him out he had them on the hook for a lot of money,” Graef Crystal, a compensation expert and Bloomberg News consultant based in Las Vegas, said in an interview. “This wasn’t pay for performance, it was pay for future performance.”
More Than Chevron
Chevron’s Watson was paid a total of $8.8 million in 2009 and $16.3 million last year, according to Chevron filings.
Gillette, 50, earned a total of $8.07 million in salary and other compensation in 2008, his last full year leading Honeywell’s aerospace division, according to company filings. His compensation was $4.14 million in 2009, before he left to run First Solar.
First Solar almost doubled production capacity as the market became oversupplied and prices for solar panels plunged, contributing to the bankruptcies of three U.S. manufacturers including Solyndra LLC, the recipient of a $535 million U.S. loan guarantee.
Ted Meyer, First Solar spokesman, wouldn’t discuss Gillette’s compensation. Gillette couldn’t be reached through his corporate e-mail account, which was closed, and his home phone number is unlisted.
First Solar Chairman Michael Ahearn, 54, was named interim CEO on Oct. 25 and the next day slashed the Tempe, Arizona-based company’s sales and profit forecasts for 2011. He plans to reduce capital spending to survive a global decline in demand and prices for solar products while shifting resources to expand sales in new regions.
Gillette’s severance package, according to First Solar’s proxy statement filed April 13, includes $2.55 million in cash and $19,111 in medical benefits.
Compensation in Shares
It also includes as much as $6.33 million in stock compensation, based on the company’s $130.14 share price at the end of last year.
First Solar rose 15 percent to $52.90 a share in New York yesterday, the biggest gain since April 29, 2010. It plunged 25 percent, the most ever, on Oct. 25 after the company announced Gillette’s departure.
Crystal said the stock-based portion of the package is probably worth less now, depending on the date the company uses to calculate his severance, and it will be difficult to calculate its exact value.
First Solar’s expects its production capacity to reach 2,236 megawatts by the end of this year, up from 1,228 megawatts at the end of 2009, mostly from new factories in Germany and Malaysia, according to a second-quarter company overview.
Competing Against Polysilicon
First Solar’s thin-film panels compete against products made from polysilicon, which is rapidly falling in price, mainly because of rising production from Chinese manufacturers led by GCL-Poly Energy Holdings Ltd. (3800) The spot price for polysilicon fell 9.1 percent to $37.40 a kilogram in the week ended Oct. 24, and has dropped 19 percent since the start of the month, according to data compiled by Bloomberg New Energy Finance.
Gillette was the third high-level First Solar executive to leave this year. The company’s president of operations Bruce Sohn stepped down in April and wasn’t replaced. And last month Jens Meyerhoff, president of its utility systems unit, departed.
Meyerhoff, who was chief financial officer during the company’s 2006 initial public offering, may be a candidate for the newly opened CEO position, said Hari Chandra Polavarapu, an analyst at Auriga USA LLC in New York.
“Meyerhoff quit in August following differences with Gillette,” and having Ahearn back in charge may entice him to return, Chandra said in an interview. “First Solar’s board would do well in bringing him back as CEO quickly.”
Gillette did well to secure such a large package on his departure, Crystal said. “The sign-on bonus metastasized into an enormous sign-out bonus.”
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