The compensation is arranged through a one-time Value Creation Plan (VCP) consisting of 425,000 Performance Share Units (PSUs), with the award divided across three market-cap milestones, according to Arm's regulatory filings. Haas earns 25% if Arm reaches $1 trillion by March 31, 2029; 50% cumulatively if Arm reaches $1.5 trillion by March 31, 2030; and the full award if Arm reaches $2 trillion by March 31, 2031. Arm will determine whether each target has been reached by using its rolling-average closing share price over any 60-day period prior to the corresponding deadline.
The shares also carry lengthy vesting periods. Awards associated with the $1 trillion, $1.5 trillion, and $2 trillion milestones vest on April 1 of 2031, 2032, and 2033, respectively, subject to Haas remaining employed by Arm. Meanwhile, missed interim milestones can roll forward. For example, shares attached to an earlier target can remain available if Arm subsequently reaches a higher milestone. The roughly $800 million maximum payout reflects the implied value of all 425,000 shares if Arm reaches the $2 trillion target, which corresponds to a share price of roughly $1,880.
ISS has raised concerns about the potential size of the award and the use of VCP-style compensation in Britain. The advisory firm said such plans remain uncommon in the UK market and can create the prospect of extremely large gains, while their effectiveness at improving corporate performance remains unproven. Glass Lewis has similarly recommended shareholders oppose the proposal, describing Haas's potential award as “excessive.” Arm currently has a market capitalization of around $264 billion, according to The Telegraph, leaving a substantial climb before the first $1 trillion milestone comes into range. The company's servers currently capture over 45% of data center revenue .
Arm argues that its compensation structure needs to be competitive with that of the US technology industry. The Cambridge-based company is listed on Nasdaq, Haas is based in California, and many of the companies competing with Arm for executives and engineers are American technology and semiconductor firms. Arm said its approach is designed around US compensation standards reflecting “the location of our key competitors for executive and other talent,” its Nasdaq listing, and the location of its CEO. The revised remuneration policy also raises the maximum achievement level for Haas's regular PSU awards from 125% to 200%, in addition to the separate VCP.
Hyperscalers commit nearly $2 trillion to secure AI hardware and memory
Key considerations
- Investor positioning can change fast
- Volatility remains possible near catalysts
- Macro rates and liquidity can dominate flows
Reference reading
- https://www.tomshardware.com/tech-industry/big-tech/SPONSORED_LINK_URL
- https://www.tomshardware.com/tech-industry/big-tech/arm-faces-potential-shareholder-revolt-over-ceos-excessive-usd800-million-pay-package-huge-stock-award-would-only-be-fully-realised-if-chip-designer-hits-usd2-trillion-valuation#main
- https://www.tomshardware.com/membership
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Informational only. No financial advice. Do your own research.