NEW YORK (MarketWatch) — Joe Moglia just got a big raise.
Online financial-services firm TD Ameritrade Holding Corp.
said Monday that it’ll pay the former assistant football coach at Dartmouth College up to $10 million a year over the life of his new five-year contract, plus an up-front, performance-based bonus of $10 million in the firm’s shares.
The company said that the up-front bonus would vest in three years.
“I am very excited about what I believe we can do for clients and shareholders over the next five years,” Moglia said on a conference call Monday morning, when shares of Ameritrade were trading lower following earnings news and other updates from the firm. “Since March 2001, our stock has outperformed the S&P 500 by more than 250%.” See full story.
Under the terms of the new deal, Moglia will be paid $1 million a year in base salary, as well as a bonus of up to $9 million a year in stock, based on the shares’ performance.
“Keep in mind that other than my base salary, 100% of every dime will be based on what TD Ameritrade earns. Other than base salary, 100% will be in stock. If our shareholders do well, we will do well.”
Industry observers had watched Moglia’s plans closely over the past year or so, because the charismatic executive has played a leading role in consolidating the industry and innovating products since he took the helm in 2001.
That was a rough time to enter the online-trading business, and a look at the history of Ameritrade’s share price shows just how tough. The shares, which traded as high as about $60 during the go-go late 1990s proceeded to sink as low as about $3 a share.
During Moglia’s early years, the shares traded at less $10 for more than two full years.
Sparked by overcapacity created during the Internet bubble and a brutal round of price cuts, several major acquisitions took place in the industry — beginning with Ameritrade’s acquisition of Datek and culminating in its deal to buy the U.S. brokerage operations of Toronto Dominion’s TD Waterhouse in June for about $3 billion.
Moglia and Ameritrade, like rival E-Trade Financial Corp.
chose to respond to the big decline in retail and online investing after the Net bubble burst in 2000 by pursuing consolidation and economies of scale.
So far, that path has paid off for Ameritrade and Moglia. Ameritrade’s shares have risen 250% over the last five years, compared with a 150% gain in the broader Amex Securities Broker/Dealer Index
and roughly flat returns for the S&P 500 Index
which is just now getting back to 2001 levels.
‘Other than my base salary, 100% of every dime will be based on what TD Ameritrade earns.’
In 2005, Moglia earned a base salary of $600,000 and pocketed a bonus of $1.53 million, down slightly from 2004, according to Ameritrade. In 2005, all six of TD Ameritrade’s top executives took a cut in bonus as the firm’s financial performance lagged 2004’s.
According to the company’s 2005 annual report filed with regulators, Moglia was eligible for up to a $1.8 million bonus in 2005.
Assuming the stock performs well and Moglia pockets his biggest eligible bonus, he should move up nicely in the rankings.
According to data from Forbes, Moglia’s total 2005 compensation ranked him at No. 32 on a list of the highest-paid executives in the diversified financial sector.
The executive said that to date about 90% of his family’s net worth, excluding any gains from the new contract, is in Ameritrade shares
and that he will be selling shares to push that number down to about 60%.
Moglia, whose company’s fortunes depend heavily on retail-level investors’ appetite for equities, said that he’d invest the majority of his stock sales’ proceeds in fixed-income assets. “We need greater diversification,” he added on the conference call.
Other Ameritrade executives would also be selling shares to diversify their holdings, according to Moglia. He told analysts and investors to expect the executives to sell 5 million to 6 million shares total over the next several weeks.
Ameritrade shares closed off 9.8%, or $2.11, at $19.38.
View more information: https://www.marketwatch.com/story/ameritrades-moglia-could-earn-up-to-10-mln-a-year