Outgoing 3M CEO made $7.2M last year, less than half new CEO’s recruitment deal

Mike Roman, 3M’s outgoing CEO, earned $7.2 million in total compensation during 2023, a 6% decrease from the year before. That’s more than $10 million less than the recruitment package offered to his replacement, Bill Brown.

Brown, the former chair and CEO of Florida-based technology and defense firm L3Harris, starts on May 1. Roman will remain chair of 3M’s board.

Brown’s initial compensation package totals $19.1 million, including $11.2 million in equity awards that are a combination of restricted stock grants, performance share awards and stock options.

Here are the details of Roman’s 2023 compensation.

Total compensation for year ended December 31: $7,174,187

Salary: $1,464,544

Nonequity incentive compensation: $2,665,470

Other compensation: $295,210

Value realized on vesting shares: $2,748,963

New stock options: 269,995

Median employee pay: $61,664

CEO pay ratio: 266-1

Total 2023 shareholder return: -3.3

Note: 3M granted exceptions to the mandatory retirement age of 65 for both Roman and Brown. Roman is 64, and the extension of the retirement age will allow him to continue as chair of the board. Brown is 61 and the exception will allow him to plan for at least the next five years of the Maplewood-based industrial company.

Roman, a career 3M executive, was named CEO in May 2019 and in his tenure oversaw expensive litigation, stagnant revenue growth, a plan to spin off the health care business Solventum and a negative 28% total return of 3M’s stock.

While Roman’s salary and annual cash-incentive bonus both increased over last year, he realized less from previously issued equity awards that vested this year. In 2022, Roman exercised $475,000 in stock options and realized $4.1 million from restricted stock awards that vested. In 2023, he exercised no stock options, and the value of restricted stock awards that had vested was $2.7 million.

There are pros and cons to hiring external CEO candidates. But it is generally more expensive to go outside the organization. Brown’s $19.1 million package includes a base salary of $1.8 million, which is higher than Roman’s current salary, a $3 million signing bonus and an annual cash-incentive target that could be worth $3.15 million. The $11.2 million in long-term equity awards includes a restricted stock grant, stock options and performance share awards.

By comparison, Roman received $12 million worth of restricted stock and stock options in 2023.