Palm To Pay New CEO Jon Rubinstein Up To $1.7 Million A Year; Colligan’s Departure Is Costly

Palm (NSDQ: PALM) will pay former Apple (NSDQ: AAPL) executive Jon Rubinstein up to $1.7 million a year as the company’s new CEO. Previously, Rubinstein was Palm’s executive chairman, but the handset maker announced on Wednesday that he will succeed Ed Colligan, who is stepping down after 16 years at the company.

Colligan, who is taking a job at Elevation Partners, which is Palm’s largest shareholder, will receive separation payments of $1.2 million that will be payable in chunks over the next year. Some of his options will also get an accelerated vesting schedule, according to a document filed with the SEC today. Rubinstein’s compensation will include a base salary of $850,000 and a bonus of up to the same amount. He will also be granted up to 430,000 options over the next four years and be able to purchase another 430,000 shares for almost nothing. Based on today’s stock price of $14.58, those shares could be worth up to $12.5 million (of course, they might also be worth nothing if he fails and Palm goes out of business).

Rubinstein was brought on board to help resurrect the company, which was not keeping up with smartphones even though it had been an early leader in the space. Rubinstein is now considered responsible for the successful Palm Pre launch, and new operating system called webOS. Previously, Rubinstein worked at Apple, where Steve Jobs asked him to lead the hardware engineering division. Rubinstein spent nine developing the iMac and the iPod. Silicon Alley Insider reports that it is “Definitely worth it: Rubinstein has led Palm’s Hail Mary comeback, and he’s already accomplished what few companies have ever done — completely revitalized their technology and vision. Without his leadership, Palm could have been toast.”

For comparison, in 2008, Colligan’s base salary was $757,500, and as executive chairman, Rubinstein received a base salary of $362,500. Palm said Colligan’s separation agreement will result in a non-cash charge to earnings of about $5 million the company’s quarter ending Aug. 28 and non-cash charges totaling about $2 million over the next 12 months.