If you think that high compensation and getting rich on stock options was only in technology companies or on Wall Street, that is not the case. David Novak, Chairman & CEO of Yum Brands Inc. (NYSE: YUM) has just pocketed about $30 million before taxes via the exercise of stock options.
An SEC filing today showed that Novak paid approximately $1,768,127.64 for 309,964 shares at an adjusted option price of $5.7043; and these were then sold on the same date of April 28, 2009 at $34.05 on average for a total of $10,554,274.20 in gross proceeds.
On the same day, Novak exercised an option to buy some 987,312 shares via options with a strike price of $8.6172 for a grand total of just over $8.5 million. He then disposed of 840,036 shares, which on a simple math basis would have had a cost basis of $7,238,758.22, and those were sold at an aggregate per share price of $34.05 or a total of $28,603,225.80.
If you add up the cost basis for these options of roughly $9,006,885.86 and back these out of the total gross proceeds from the sales of roughly $39,157,500.00 you come up with a net pre-tax take-home exercise of approximately $30,150,614.14. His salary and compensation as of December 31, 2008 was also $5.45 million, and we saw that some $36.75 million in options had been exercised before.
At the start of the decade in 2000, this stock was under $10.00. Today, its shares are trading around the $34.00 mark and the 52-week trading range is $21.50 to $41.73.
We at 24/7 Wall Street do not vilify executives for high compensation, nor do we feel that salary and compensation caps are a fair notion of how outsiders should try to use the bully pulpit against companies. But we also want to point this out so there are fewer and fewer notions in the public that only high financiers and creators of strange financial transactions are the ones who get rich in corporate America.
Jon C. Ogg
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