IBM shareholders asked to sign off on CEO’s $33m pay package

According to proxy adviser Institutional Shareholder Services, Ms Rometty’s 2016 package may actually exceed $50m, based on its own estimate for the value of her options at the time they were granted.

Independent calculations also suggest that at current values — which take into account the rise in IBM’s share price since the grant — her compensation is now worth $65m, or almost twice as much as her reported pay.

That is higher than any of her closest industry rivals, such as Microsoft’s Satya Nadella and Hewlett Packard Enterprise’s Meg Whitman, and puts her among the 10 best-paid CEOs in the US.

This disparity — between what companies say they pay and what CEOs actually get — reflects the imprecise art of valuing stock options, which involves a complex, and at times opaque, numbers game.

By tweaking certain assumptions, awards disclosed in regulatory filings can appear smaller than they really are.

While it is legal, and even common, Ms Rometty’s case has raised more than a few eyebrows.

John Core, a professor of accounting at MIT’s Sloan School of Management, said of IBM’s valuation of Ms Rometty’s options: “Their valuation is very unusual.

There’s certainly a measure of discretion in these models, although this seems to be on the more extreme side.”

Ed Barbini, a spokesman for IBM, said the New York-based company has used the same methodology to value option grants for more than a decade, in accordance with generally accepted accounting principles and Securities and Exchange Commission regulations.

Neither Ms Rometty nor the directors responsible for setting her pay were available to comment, he said. PwC, which audited IBM’s books, also declined to comment.

Since she became CEO in January 2012, IBM has returned 0.05% including dividends. The S&P 500 has more than doubled in the same span. IBM’s shareholder meeting takes place in Tampa, Florida, today.

Bloomberg