Online bookstore hooks top pair with billions

SEATTLE - Amazon.com awarded stock options that could be worth a combined $US2 billion ($4.1 billion) in 20 years to two top executives who joined the biggest internet retailer last year.

President Joe Galli, formerly with toolmaker Black & Decker, and chief financial officer Warren Jenson, hired from Delta Air Lines, also received cash bonuses of more than $US7 million each for signing with Amazon.com.

Online businesses are using lucrative compensation packages to lure executives from traditional companies, say executive-pay consultants.

In Amazon.com, they are joining a company that began selling books five years ago, had sales of $US1.6 billion last year and has yet to make money.

Amazon founder and chief executive Jeffrey Bezos earned just $US81,840 in base salary last year. He owns a third of the company's stock.

But by any measure, the new executives' packages are ground-breaking.

The packages "answer the issue of what corporations are having to do to attract the talent they need," says Judy Fischer, managing director of Executive Compensation Advisory Services in Alexandria, Virginia.

The option grants are unusual not only for their size, but also the terms during which the executives can use the options to buy shares.

The options can be exercised at different points over the next 20 years, while most companies grant 10-year terms. The longer executives have to exercise options, the better the chance the company's stock will appreciate.

Mr Galli, aged 41, received options to buy 3.92 million shares. The grant would be worth $US1.3 billion in 2019 if the stock rises 10 per cent a year, says Amazon.com's proxy filing with the Securities and Exchange Commission.

The 43-year-old Mr Jenson received options for two million shares, which could realise $US745 million in 20 years. Those options had a value of $US25.8 million at the end of last year.

Mr Galli, who was also named chief operating officer when he joined Amazon.com in June, received a $US7.9 million signing bonus. Of that, he received $US2.9 million last year. The rest will be paid this June and next.

His incentive package includes options to buy 1.47 million shares until 2009, and 2.45 million shares from 2009 to 2019. The exercise price is $US57.95 a share.

The options had a value of $US71.2 million at year-end, the proxy says.

Mr Galli's annual salary is $US200,000.

Mr Jenson, who left Delta in September, received $US2.15 million of his $US7.4 million signing bonus last year. The rest will be paid each year until 2003.

"In recruiting, companies are also having to resort to cash," Judy Fischer says. "Executives are leaving behind a lot of money on the table, so corporations are having to make up for that."

Mr Jenson's stock option, which he receives in yearly instalments over 20 years, has an exercise price of $US63.25 a share, the stock price on the date of the grant. The options had a value of $US25.8 million at year-end, the proxy says.

He also agreed to an annual base salary of $US175,000.