Executives have received big pay rises and hefty bonuses at a time when thousands of tech staff have been made redundant, salary freezes mplemented and the value of stocks gone through the floor, writes Jamie Smyth, Technology Reporter

The Irish technology sector may be tanking, but its executives are still paying themselves like the good old days were still here.

At a time when it is estimated that up to 20,000 Irish technology employees lost their jobs and many companies introduced strict salary freezes, executives at several flagship firms were given pay rises and trousered hefty bonuses.

Riverdeep, the Dublin-based e-learning group, more than tripled executive pay in the year to the end of June 2002 at a time when its share price slumped, according to its annual report which was published last month.

The firm, which was taken private in a hugely controversial transaction earlier this year, paid executives $1.76 million (€1.63 million) in the year to the end of June 2002, up from $571,000 a year earlier.

During this 12-month period, shareholders saw the value of Riverdeep shares halve from €5.45 to €2.69. The shares subsequently fell below €1 on the Irish Stock Exchange before the firm was taken private at a price of €1.40

Mr Barry O'Callaghan, Riverdeep chief executive, was paid a base salary of $275,000 and an incentive bonus of $400,000 during these 12 months. This compares to a base salary of $250,000 and an incentive bonus of $250,000 in the previous year.

At the time, Mr O'Callaghan was a significant shareholder in Riverdeep, owning 10 million shares (or 4 per cent of the firm) and holding options over a further seven million at June 30th, 2002.

But this was nothing compared to the package offered to Mr James Levy, the incoming chief operating officer at Riverdeep. He was paid a basic salary of $741,785 and a performance bonus worth $300,000. On top of this package, Mr Levy was offered six million stock options in 2002.

Mr Levy has served on the Riverdeep board since February 2001 and was appointed to the role of executive vice-chairman in July 2001. In October 2001 he was made chief operating officer.

The third executive director at Riverdeep is Ms Gail Pierson, who is president, product development and operations at the e-learning company. No specific details of her salary are outlined in the company's annual return.

The firm's annual return says that the group expects top levels of ability and commitment from all members of its management. In return, it aims to provide a high-level compensation package linked to the financial prosperity of the group and its shareholders.

Riverdeep's operational performance, which reported a loss of $30.2 million in the year to the end of June 2002, compared with a loss of $52.7 million a year earlier, was an improvement.

But clearly, the poor share-price performance during the year to the end of June 2002 raises serious question marks over the significant pay hikes to its executives.

Mr Bill Hennessy, a partner at Merc Partners, a specialist in human resources issues, says any firm increasing executive salary or bonuses in the current climate would be an exception.

"Our experience in dealing with companies is that remuneration is down for most executives. Bonuses used to be 100 per cent of base salary but this is now down to just 20 per cent," according to Mr Hennessy. "Also, most stock options are now under water."

A company's share-price performance is definitely a factor that should be taken into account when remuneration committees consider setting executive pay, says Mr Hennessy.

Operational issues such as revenue, profit, headcount and cost control are issues to be considered, he says.

Riverdeep executives could argue that significantly higher revenues generated in the year to the end of June 2002 and a sharp fall in pre-tax losses justify some level of increase. However, the poor share performance, which ultimately led to the firm being taken private by management, suggests its original strategy had failed.

But shareholders at software firm Iona will find it even harder to stomach the $134,750 bonus paid to its chief executive, Mr Barry Morris, in the year to the end of December 2002.

This bonus payment brought Mr Morris's total salary to $529,375 during 2002, an increase on the $508,083 he was paid in the previous year.

In fact, salaries and fees to 18 executive officers at Iona was $3 million in 2002, a major increase on the $1.9 million paid to 15 executives in the year to the end of December 2001.

Despite the increases in executive pay at Iona during 2002, the company's share price collapsed from €22 at the start of the year to just €2 at the start of 2003.

During this period the firm laid off hundreds of staff, its revenues slumped and it reported a net loss of $369 million - the biggest in its corporate history. Hardly the kind of stellar performance that justifies a bonus. Indeed, the firm's recent profit warning and an announcement this week that it will shed a further 170 jobs suggests a change of management is needed, not new bonuses.

This possibility is clearly not lost on Iona's executives. New severance and change-of-control agreements were drawn up over the past few weeks to protect their interests.

Under the new plan, Iona executive directors are entitled to two years' salary, a bonus and benefits if it is taken over by a rival. They will also be able to exercise all their stock options. But, with Iona's share price currently at €1.30, the chances of cashing in on this element of the plan seems limited.

Iona's severance and change-of-control agreements are not unusual in a sector that is engulfed in a wave of consolidation.

Irish chip-design firm Parthus included similar severance terms in its merger with the Ceva division of US-Israeli firm DSP Group last year. ParthusCeva's two senior Irish executives, Mr Kevin Fielding and Ms Elaine Coughlan, will benefit from lucrative golden handshakes when they leave the firm next month.

Under the terms of the ParthusCeva merger agreement, Mr Fielding will net two years' salary worth €280,000 per annum and a pension worth up to €615,000. Ms Coughlan will net up to €500,000 - two years' salary plus pension entitlements.

Not a bad result in a year when ParthusCeva executives reduced the firm's revenue forecasts from $75 million to $48 million.

Of course, former staff at the firm who were made redundant in a restructuring plan last year and ParthusCeva shareholders, who have lost money, are unlikely to view these payoffs as a "result".