Medtronic’s CEO Made a Ton of Money Last Year

Posted in Medical Device Business by Chris Newmarker on July 27, 2015

Much of Omar Ishrak’s $39.5 million in compensation was related to Medtronic’s $48 billion merger with Covidien.

Medtronic Omar Ishrak
Medtronic CEO Omar Ishrak

Chris Newmarker

Total compensation for Medtronic CEO Omar Ishrak skyrocketed to a whopping $39.5 million for the company’s fiscal year ended April 24, according to Medtronic’s recently filed proxy statement with the SEC.

The $39.5 million amount would make him one of the highest paid CEOs in the medical device industry. About $25.6 million of the compensation, though, was mostly to help Ishrak pay for the special U.S. excise taxes he and other top Medtronic executives personally owed after the January closing of Medtronic’s $48 billion acquisition of Covidien. (Here’s a timeline of the deal.)

Such excise taxes came on top of capital gains taxes that Ishrak and all other existing Medtronic shareholders owed after the deal had them swapping the old Medtronic stock for stock in the new Medtronic plc, said Medtronic spokesman Fernando Vivanco.

“They also have to pay their capital gains tax like every other shareholder does,” Vivanco said of the senior leadership.

The acquisition allowed Medtronic to move its official headquarters from Minnesota to Ireland, saving money on U.S. taxes over the long-term. Many companies involved in such inversion deals have justified tax reimbursements to top executives because the excise taxes would otherwise penalize the executives for pursuing a strategy that financially benefitted the company.

Medtronic says in its proxy statement: “The payments are required to neutralize the effect of the excise tax so that [named executive officers] were neither harmed by, nor benefited from, the transaction.”

That didn’t stop long-time shareholders, including some among the companies’ earliest employees, from giving Ishrak an earful during the company’s annual meeting in August 2014. Ishrak responded that he understood the shareholders’ pain over the capital gains taxes they needed to pay. A shareholder lawsuit was filed in federal court over the compensation plan, but a U.S. District Judge in Minnesota declined to issue an injunction in December, according to the Star Tribune of Minneapolis.

Ishrak’s $39.5 million in total compensation handily exceeded what most other top medtech CEOs received in their company’s most recent fiscal years. That included $25.0 million for Johnson & Johnson CEO Alex Gorsky, $9.1 million for Stryker CEO Kevin Lobo, $10.5 million for Boston Scientific CEO Michael Mahoney, and $10.2 million for St. Jude Medical CEO Daniel Starks.

Total compensation for Ishrak was $9 million for the 2013 fiscal year and $12 million for the 2014 fiscal year.

Ishrak’s salary rose slightly to $1.5 million in 2015. The salary was more in line with Ishrak’s peers such as Gorsky ($1.5 million), Lobo ($1.1 million), Mahoney ($921,302), and Starks ($1.1 million).

For fiscal year 2015, Ishrak also received nearly $3.5 million in stock awards, $3.1 million in option awards, $5.6 million in non-equity incentive plan compensation, and $192,470 in changes to the value of his pension.

Ishrak is often cited as a top CEO in the medical device industry. Qmed readers picked him as best medtech CEO in a survey last month.

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