Tom Rutledge's (CHTR) Widely Reported Equity Award Quantified

In the last two years, any discussion of Charter (CHTR) has not been without reference to the equity incentive package issued to the senior management team of the company in 2016. Greg Maffei has spoken about it to anybody who will listen (which is a lot of people because Maffei has a good track record as an investor). Seeking Alpha/VIC/COBF/etc. posts have also referenced it. But I had yet to see it quantified. Of course, there’s the headline figure of $99 million for Tom Rutledge (CEO) from the 2016 proxy statement. But serious investors know that the Summary Compensation Table in the proxy statements tells us almost nothing about the reality of compensation plans.

To really understand things, I’ve tried to make sense of that particularly large equity package granted to the management team by quantifying the pay-outs to the CEO in the event of the stock price reaching various thresholds. The results are in the following table:

Note:

I have calculated the payout at each threshold assuming Rutledge exercised all of his options at that threshold. So, for example, the 364.97 threshold assumes that options vested at 289.76 are also held and exercised (or exercised and stock held) at 364.97 per share.

It could, just as easily, be argued that the decision to hold from 289.76 to 364.97 is Rutledge’s own investment decision unrelated to any equity incentive envisioned by the BOD. However, it could also be argued that, if he believed in these targets, there is no reason he wouldn’t hold as many options as he could as long as he could. In that case, to see the maximum upside to Rutledge, we must assume that he does hold these options.

In reality, he likely does not have the type of additional liquid funds required to exercise the options, hold the underlying stock, and to pay taxes thereon. So readers can make their own changes to the calculation as needed. There are too many permutations and combinations for me to address them all here. The conclusion remains that this award package should serve to incentivize Rutledge rather well. Perhaps, more than well.

There are also further small equity awards/grants, but I have only attempted to quantify the large award from 2016 which is the largest portion of Rutledge's compensation 2016 onwards.

Disclosure/Disclaimer:

I own shares of CHTR (through LBRDK). Under no circumstances should this communication be construed as investment advice or a recommendation to buy or sell any security, whether expressed or implied. Factual statements are believed to be truthful and reliable, but are not warranted against errors or omissions. Please do your own due diligence prior to investing.