Commentary by David F. Larcker, James Irvin Miller Professor of Accounting & Director, Stanford GSB Corporate Governance Research Program; and Brian Tayan, Stanford GSB Case Writer, MBA ’03.
In 2009, Onyx Pharmaceuticals made a restricted stock grant with some unusual features to CEO N. Anthony Coles. According to the company’s proxy, “the award vests immediately upon the closing of Dr. Coles’ purchase of a home in the San Francisco Bay Area. If Dr. Coles has not purchased a home in the San Francisco Bay Area within 18 months of the grant, then the grant would lapse entirely and will not vest.” The grant was valued at about $600,000.
Dr. Coles previously served as president and CEO of NPS Pharmaceuticals, a biotechnology company located in New Jersey. Presumably, the company felt it needed to provide incentive for Coles to relocate closer to Onyx’s headquarters, which are in Emeryville, CA.
As for why this was structured as a restricted stock award and not some other form of payment, we cannot say. Still, it points to some of the personal issues that are often involved in recruiting a CEO. Based on our work with executive recruiters, we have heard time and again the lifestyle issues are critical to whether a CEO appointment ultimately proves successful. These include where the job is located, number of days spent traveling, quality of home life, willingness of the spouse to relocate, and the number and age of children.
We don’t delve into the personal life of Dr. Coles. Still, we hope for the sake of Onyx shareholders that Dr. Coles likes his new home.
As does his family.