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Herbalife CEO was paid $10.3 million in 2012, down 58%

April 03, 2013|By Stuart Pfeifer
  • Herbalife Ltd. Chief Executive Michael O. Johnson was paid more than $10 million in 2012.
Herbalife Ltd. Chief Executive Michael O. Johnson was paid more than $10… (Irfan Khan / Los Angeles…)

Herbalife Ltd. Chief Executive Michael O. Johnson was paid $10.3 million in 2012, a 58% cut from the $24.6 million he received in 2011, Herbalife said in a regulatory filing.

Johnson, 58, a former Walt Disney Co. executive, has served as chief of the Los Angeles-based nutritional products company since 2003.

He was paid $1.2 million in base salary in 2012, with the rest of his pay coming from stock-option awards, performance-based bonuses and perks. The biggest difference from 2011 was the value of his stock-option grants, which fell from $19.5 million in 2011 to $5 million in 2012, Herbalife said in Wednesday’s filing.

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Counting exercised stock options issued in earlier years, Johnson made more than $89 million in 2011, making him the highest-paid chief executive in the country, according to research firm GMI Ratings. The firm has not yet released its analysis of 2012 executive compensation.

Herbalife issued a statement Wednesday that explained Johnson’s pay:

“In 2011, Mr. Johnson received a performance-based equity award that is only worth anything to him if the company grows faster than forecast. In 2012, Mr. Johnson received only his regular annual equity award. … Hence the swing,” the company said.

“The decrease in value does not reflect a decrease in performance. To the contrary, it reflects that he received a supplemental equity award in 2011 that will take three years to earn into.”

Word of Johnson’s pay follows three rocky months for Herbalife. In December, hedge fund manager Bill Ackman accused Herbalife of operating a pyramid scheme because of commissions its independent distributors receive from sales of  others they recruit to the company. He took a widely publicized $1-billion short position against Herbalife’s stock, boldly predicting its shares would fall to zero.

Herbalife's shares plummeted after Ackman’s accusations, trading as low as $24.24 a share, or 67% less than its high for year.

The company fought back, arguing in a presentation to Wall Street that its business model is perfectly legal –and profitable. The company later reported record profit of $477 million for 2012 on $4.1 billion of sales.

Herbalife's shares climbed Tuesday. Late in the trading day, the stock was up 88 cents, or 2.3%, to $38.89, giving it a gain of about 18% so far this year.

Michael Swartz, an analyst with SunTrust Robinson Humphrey Inc. in Atlanta, says Johnson has earned his pay.

“Numbers speak for themselves,” Swartz told Bloomberg News. “They blew away their EPS, volume points and operating income targets for the year and were compensated accordingly.”


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