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Local Tech Wire

RALEIGH, N.C. – Two weeks after Chairman Matthew Szulik exercised options on more than 500,000 shares and sold them for more than $15 million, board has increased requirements for executives to own shares.

Red Hat shares, which traded Wednesday at $27.56, are near their 52-week high of $28.94 and are selling at their highest levels since 2006.

Chief Executive officer Jim Whitehurst must hold 140,000 shares, Red Hat disclosed in an

Executive vice presidents must hold 33,000 shares and senior vice president must have 18,000 shares.

The board also now requires non-employee directors to own 10,000 shares.

The requirements take effect next year on March 1.

“Stock ownership guidelines can be a compelling way to ensure that the interests of executives and directors are more strongly aligned with the interests of stockholders,” Red Hat spokesperson Kara Schiltz told Local Tech Wire and WRAL.com.

“Since 2006, we have required officers and directors to attain a specified level of ownership within three years of joining the company,” she added.

“Our revised guidelines increase these minimum ownership levels substantially and require executives and directors to retain a certain percentage of shares received as compensation unless these minimum levels are exceeded.”

Whitehurst owned 319,664 Red Hat shares as of Oct. 16, according to Yahoo! Finance. Charles Peters, the chief financial officer, owned 73,086 shares as of Oct. 26 and Szulik owned 228,072 shares as of Nov. 13, Yahoo! says.

On Nov. 13, Yahoo! “Insider Transactions” shows that Szulik exercised options on 257,279 shares at $13.16 and sold them for $28 each for a total of $7.2 million.

On Nov. 12, Szulik exercised 242,421 options at $13.16 and sold 299,623 at $28 for a $8.4 million payday. The former CEO of the company retired from that role and later was replaced by Whitehurst.

Szulik is not the only executive who has exercised options and sold shares this fall.

Peters sold 80,000 shares on Oct. 12 at more than $28 per share. His payday: $2.25 million. he cash out came after he exercised options on 60,000 shares for $10.70.

Alex Pinchev, Michael Cunningham and Mark Cook also sold shares as did board member Hugh Shelton, retired Army four-star general and former Chairman of the Joint Chiefs.

Pinchev leads the company’s worldwide sales, services, and field marketing organization. He exercised options on 65,625 shares at $15.34 on Oct 9. That same day he sold more than 100,000 shares at $28 for a cash out of $2.82 million.

Cunningham, executive vice president and general counsel, sold more than 97,000 shares at between $27.3 and $27.85 for more than $2.7 million. Three weeks later on the 28th he exercised options on 56,200 shares at $15.34.

Controller Mark Cook, meanwhile, sold 16,000 shares for a payout of $446,400.

Shelton, who helped recruit Whitehurst, sold 20,000 shares at $27.61 each for more than $552,000.

The filing reads:

“Each non-employee director, the CEO and each executive vice president and senior vice president who reports directly to the CEO (each, a ‘covered individual’) is required during the term of his or her service with Red Hat to either hold the applicable number of shares of Red Hat common stock set forth under the Stock Ownership Guidelines or comply with the Retention Requirement … This policy applies to shares of Red Hat common stock acquired under any Red Hat equity compensation plan. This stock ownership policy is administered and interpreted by the Compensation Committee of Red Hat’s Board of Directors.”

According to the filing, the number of shares was determined by an average of base salary for executives and the cash retainer for directors.

Some exceptions are allowed, however.

“Relief from this policy may be granted in special circumstances, including without limitation financial hardship, compliance with a court order, educational expenses, and estate planning, at the sole discretion of Red Hat’s Compensation Committee, following a written request by a covered individual,” the filing said.