IBM CEO Arvind Krishna's Total Compensation Drops by a Million to $16.5 Million

Krishna's total compensation decreased by $1 million this week to $16.5 mil, IBM announced in a regulatory filing this week. His basic salary remains the same and he also received $8.9 million in stock awards and $2 million in options.

Krishna is an accomplished business executive and technologist at IBM, leading their transformations in areas such as artificial intelligence, cloud computing, quantum computing and blockchain. Furthermore, he's responsible for IBM Research.

Total compensation

Total compensation refers to all financial rewards an employee receives as part of their employment, such as base salary, bonuses, commissions and other monetary payments. It may also cover employee benefits like health insurance, retirement plans and paid vacation days.

According to a regulatory filing, IBM CEO Arvind Krishna's total compensation decreased by $1 million to $16.5 mil in 2022. His base salary remained at $1.5 million, the same as the prior year.

Krishna, a PhD electrical engineer, has been with the company since 1990 and has made significant contributions in fields such as wireless networking, security, systems and databases.

He is also the co-author of multiple technology patents. For most of his professional life, he worked at IBM's Watson Research labs.

At IBM, Krishna has played an instrumental role in many strategic initiatives such as hybrid cloud and artificial intelligence. Furthermore, he was responsible for overseeing the company's recent acquisition of Red Hat.

IBM's software segment, which accounts for around 70% of their revenue, saw its revenue surge 11% in 2022. Additionally, it generated $10.4 billion in cash from operations with an operating margin of 3 percent.

Meanwhile, consulting revenue increased 15% excluding foreign exchange gains due to increased business with hyperscalers.

Kavanaugh noted the company's hybrid cloud business had seen the most impressive growth this year, generating $9 billion in revenue. She explained that this segment has become more valuable as users can access multiple clouds - both public and private - simultaneously.

On a conference call with investors, Krishna highlighted AI and hybrid cloud as "transformative technologies" that will contribute $16 trillion to global economic activity by 2030. He also mentioned how customers are investing in automation and digital tools to combat wage inflation, cyber threats, supply chain issues and other headwinds.

IBM is confident that new business will remain slow compared to renewals in 2023, provided customers have a strategy for using AI and automation tools.

Long-term incentive

In 2022, IBM CEO Arvind Krishna earned a total compensation of $16.5 million, $1 million less than in 2021. His base salary of $1.5 million and stock awards of $8.9 million were reported through regulatory filings as his total compensation to the average employee's was 271:1, while the average CEO salary in 2021 was $61,242.

His long-term incentive was $17 million, the first increase since he became CEO in 2020 and aligned with the median target cash compensation of his 2023 benchmark group (CEOs in similar companies). According to a filing by IBM, 77% of his annual target compensation is at risk and subject to attainment of performance goals and IBM's stock price performance.

His compensation package included almost $3 million in non-equity incentive plan payouts for 2021, due to reorganization efforts that included spinning off its managed infrastructure services business as an independent company called Kyndryl and deploying the Eagle 127-Qubit system, the world's first quantum chip that breaks through 100 qubits. Other accomplishments during 2021 included delivering operational quantum computers to Japan and Germany as well as forming a partnership with Samsung to develop 2-nanometer chip technology.

Additionally, the company reported a 19 percent surge in hybrid cloud revenue for 2021 - an impressive change from the prior year when revenue declined 8 percent.

This is an important milestone for the company as it endeavors to become a major cloud player, much like Microsoft did six years ago. While it remains too early to tell whether this initiative will succeed or not, the fact that they have plans is encouraging.

If the new CEO can bring his expertise and vision to the cloud division, IBM could potentially regain its prominence as a leading tech brand. But competing against Amazon and other rivals will be no easy feat; it will require significant effort from all levels of management as well as an overhaul in technical leadership.

Short-term incentive

Arvind Krishna, CEO of IBM, isn't a big fan of artificial intelligence taking over human workers' jobs. While he recognizes its potential to reduce labor costs, he worries that it may also eliminate some jobs from workers.

The chief executive of IBM recently met with The Financial Times to discuss his plan to transform their AI division, but ultimately delivered some grim predictions about how artificial intelligence will shape employment opportunities in the future.

"AI can potentially replace a variety of jobs, from art and copywriting to paper-pushing lawyers and influencers. People may not realize just how many tasks will soon be automated," she continued. "AI will revolutionize many industries."

Krishna said his company isn't investing money back into its AI division, which has struggled to gain traction in the market. Instead, he wants to focus on building and expanding their markets in AI, cloud and quantum computing.

Krishna emphasizes that AI can offer superior solutions at lower costs than hiring a human would. He mentions how the technology may aid customer service, where bots collect data while humans make the final determination.

One area he is optimistic about is hybrid cloud, which integrates public and private cloud offerings. He noted that hybrid cloud can be more beneficial than a single cloud since users can run applications both on-premises and at the edge.

He highlighted Red Hat's $34 billion acquisition, which has become a dominant software vendor in the hybrid cloud space. Furthermore, IBM cited their partnering strategy as something that will enable them to gain new business in 2023.

Krishna must ensure his leadership team is aligned on the company's future use of AI, cloud and hybrid-cloud technologies. If he can convince them to focus on creating products and solutions that address real-world problems, Krishna is likely to be rewarded for his efforts.

Base salary

Base salary is an integral component of any compensation package. It's essential for both employers and employees to know this data.

Base pay is usually determined by an employee's position and years of experience. Those with more knowledge and qualifications tend to receive higher base salaries. Furthermore, rates can differ by industry and job type as well.

In the United States, a base salary may also include benefits like health insurance, paid time off, retirement plans and other forms of compensation. These amounts can range anywhere from a small sum to an enormous one depending on the job responsibilities.

For instance, web designers typically earn more than accountants due to their greater experience and qualifications. The same holds true for other professions such as nurses or teachers.

Base salaries can also be an effective tool to evaluate employee performance and negotiate raises. They're not meant to be the final answer, but they do give employers and employees a sense of how much they'll make when accepting a specific job offer or discussing an increase in pay.

Krishna, the former Chief Product Officer of IBM's Cloud and Cognitive Software division, began his career at IBM in 1990 and has held various executive and research roles ever since. As leader of their research group, he oversees nearly 3,000 scientists and technologists located at 12 labs around the world - spread over 12 continents.

Krishna has had a major role in developing IBM's core technologies, such as artificial intelligence (AI), cloud, quantum computing and blockchain. As a leader, he's able to achieve success today while building the business for tomorrow," Rometty said. "Krishna has done an amazing job."

In 2022, Krishna earned $16.5 million in total compensation, which was $1 million less than in 2021. This meant his overall compensation had an equity ratio of 271:1, or 271 times higher than the average employee's, according to regulatory filings.