Executives at the top layer of Toronto-Dominion Bank are reaping the benefits of long-dated stock options.
In the past few months, five different execs – including chief executive officer Ed Clark – have exercised stock options for whopping amounts.
Mr. Clark’s latest exercise, announced after markets closed on Friday, is for 198,304 options. At today’s stock price, and assuming a 1-to-1 share-to-option exchange ratio, that amounts to just shy of $16-million. (But keep in mind that his profit is much smaller.)
The other four execs who exercised options since April include: Tim Hockey, head of Canadian banking; Bob Dorrance, head of wholesale banking; Bharat Masrani, head of U.S. personal and commercial banking; and chief financial officer Colleen Johnston.
In each case, at least some portion of the shares will go to charity – though a final percentage is never disclosed. Ms. Johnston has nobly donated all 41,656 shares to charity. Moreover, some execs will hold at least some of the shares that they don’t donate (Mr. Clark, Mr. Masrani), while others (Mr. Dorrance, Mr. Hockey) have sold, or plan to sell, their stakes.
As for timing, most of the options were set to expire in December 2012 so the execs were forced to act at some point. (Mr. Clark is the exception – his expire in December 2013.) And though the execs are making a pretty penny for moving now, with the stock around $80, you could argue that they deserve such rewards for driving the share price up since the options were first awarded in 2002 and 2005. In 2002, TD’s stock price averaged about $35, and in 2005 the average price was around $55.
Still, it boggles the mind to consider how many options bank execs get. As the Globe pointed out earlier this year, you may rarely hear about stock-based compensation but when you see the numbers, the cheques from cashing in can be huge.
Mr. Dorrance exercised 297,088 options (worth about $24-million) back in April, and the 146,508 options Mr. Masrani exercised last week were worth about $11.5-million.
Update: To clarify, the figures mentioned above are the total value of the stocks obtained by exercising the options. In Mr. Dorrance’s case, for instance, though his options were worth about $24-million, according to old proxy circulars, his options had strike prices of $40.98 and $60.92. Taking those costs into account, his profit from exercising is more like $10-million.
As for Mr. Clark, his profit comes in around $2.5-million.