Creating wealth
Published: Mon, Sep. 18, 2006 12:00AM
Modified Mon, Sep. 18, 2006 08:33AM
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closeThe writer of a Sept. 10 People's Forum letter about the compensation of Matthew Szulik, CEO of Red Hat, stated that "such exorbitant compensation should be publicized." Well, it is publicized. Go to Yahoo Finance, type in Red Hat's ticker symbol (RHAT) and click on profile.
But more importantly, is $66 million exorbitant? First of all, Red Hat's stock price has increased from about $3 five years ago to over $22 at this writing, an increase of over 600 percent which is about 50 percent per year. This amounts to $3.3 billion of wealth being created for Red Hat shareholders over this time. Sure, $66 million is a lot of money, but the compensation paid to Szulik is between him, Red Hat's board of directors and the shareholders of the company.
Furthermore virtually all of Szulik's compensation was in the form of options that would have been worth significantly less had the stock price stayed at $3.
More Letters
Incidentally, I own no Red Hat stock directly, nor am I affiliated with the company.
Richard Warr
Associate Professor of Finance
N.C. State University
Raleigh
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