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Forbes magazine lobbed Micron Technologies Inc. top executive Steve Appleton a big fat raspberry by naming him one of the "worst CEOs in the country" and grading his performance with an F.
The grade, posted on the Forbes Web site but not in the printed magazine, comes just two months after Fortune magazine published a poll of 10,000 business leaders who voted Micron onto a list of America's most-admired companies.
Who's right? Is it possible that both are?
Evaluating a chief executive as Forbes did, using a ratio of his pay to the company's revenues, is a complex affair. Running Micron, Idaho's largest employer, means Appleton's reputation is tied to its seesawing stock price and a semiconductor industry where prices can vary hugely in short time periods.
Averaged out, Appleton's pay was $9.3 million per year over the six-year period, Forbes reported and Micron officials confirmed. His pay for 2004 was $1.5 million, according to the company's current proxy statement.
Appleton declined to comment on the Forbes evaluation of his performance.
"While Steve is very well-read, his focus is and will continue to be on creating the maximum return for our shareholders," said Micron spokeswoman Trudy Sullivan. "Steve is one of the few CEOs in the world who is truly paid for his performance. When times are tough, his (pay) reflects that. When the company is doing well, his pay is in synch with the achievements. Isn't that the way any shareholder would want it?"
For instance, between October 2001 and December 2003, Appleton did not take a salary, Sullivan said. In contrast, Appleton profited from stock options he cashed in during two of the six years on which the Forbes evaluation is based because of a 500 percent stock price increase during the tech bull market, Sullivan said.
Is Appleton - or any one person - responsible for the volatile and competitive marketplace for DRAM, the company's core product? (DRAM, pronounced dee-ram, stands for dynamic random access memory chips.) Does the Forbes F rating imply that perhaps another executive could have steered the company to better returns?
"I'll let others tread on those eggshells" and judge Appleton's pay vs. Micron's performance, said Andrew Norwood, a Gartner Dataquest analyst who studies 18 DRAM makers from his office in Surrey, England. "But realize this is a highly cyclical industry, and DRAM is the most highly cyclical aspect of it. They're really in the thick of it."
Appleton is a 23-year Micron employee who worked his way up to chief executive officer from an hourly job he took after graduating from Boise State University. Appleton's poor rating was derived with a formula Forbes used for hundreds of companies, comparing the company's annual revenues to the CEO pay and arriving at a ranking that could be contrasted to CEOs in dozens of industries.
With 11 years in the top spot at Micron, Appleton has overseen an annualized return of 1 percent, Forbes reported. Forbes also stated that the company's revenues have declined an average of 13 percent per year over the six years. Sullivan verified that the figures Forbes used were correct.
Whether contrasting CEO pay to company returns is a valid measure of success is an open question for industries as volatile as memory chips, say experts.
"Micron is fighting an uphill battle and movement uphill is tough," said Victor de Dios, head of a California research firm that evaluates the DRAM marketplace. Micron and Hynix Semiconductor are in a pitched battle for the No. 2 spot as a DRAM supplier, with Samsung Electronics Co. of Korea as market leader, he said.
De Dios declined to say if he thought Appleton deserved his F rating from Forbes. "With such a visible person you'll get many" opinions, de Dios said. "But it's fair to say he's the only consistent DRAM CEO in the past 11 years."
De Dios said that the DRAM marketplace is so volatile that it is "hard to even find similar markets" to compare it to. He noted that the unique nature of DRAM prices made steady returns for Micron unlikely. "Prices can drop 80 percent in three quarters," de Dios said.
Micron competitors, such as Samsung, have other product lines that help provide more stable revenues. There were twice as many companies in the notoriously competitive industry six years ago, de Dios said.
"The measure (of success) here is survival," de Dios said.
The Fortune magazine listing of Micron as among the most-admired companies in its field was derived by polling 10,000 business executives and analysts.
In publishing the results, the magazine's 23rd such survey, Fortune editors assigned ratings based on the following eight benchmarks: innovation, employee talent, use of corporate assets, social responsibility, quality of management, financial soundness, long-term investment and quality of products or services. Micron received a rating of 5.76 on a scale where 10 was the highest.